- i -

REFERENCE TITLE: liquor omnibus State of Arizona House of Representatives Fifty-third Legislature Second Regular Session 2018

HB 2334

Introduced by Representative Weninger

AN ACT AMENDING SECTIONS 4-101 AND 4-112, ARIZONA REVISED STATUTES; AMENDING TITLE 4, CHAPTER 1, ARTICLE 2, ARIZONA REVISED STATUTES, BY ADDING SECTION 4-116.01; AMENDING SECTIONS 4-120, 4-201, 4-203, 4-203.02, 4-203.03, 4-205, 4-205.04, 4-205.08, 4-205.10, 4-205.11, 4-206.01, 4-207, 4-210, 4-241 AND 4-243, ARIZONA REVISED STATUTES; AMENDING LAWS 2014, CHAPTER 253, SECTION 37; RELATING TO LIQUOR LICENSES.

(TEXT OF BILL BEGINS ON NEXT PAGE)

HB 2334

- 1 -

Be it enacted by the Legislature of the State of Arizona: 1 Section 1. Section 4-101, Arizona Revised Statutes, is amended to 2

read: 3 4-101. Definitions 4 In this title, unless the context otherwise requires: 5 1. "Act of violence" means an incident consisting of a riot, a 6

brawl or a disturbance FIGHT, AN ALTERCATION OR TUMULTUOUS CONDUCT in 7 which bodily injuries are sustained by any person and such THE injuries 8 would be obvious to a reasonable person, or tumultuous conduct of 9 sufficient intensity as to require the intervention of a peace officer to 10 restore normal order, or an incident in which a weapon is brandished, 11 displayed or used. Act of violence does not include the use of nonlethal 12 devices by a peace officer. 13

2. "Aggrieved party" means a person who resides at, owns or leases 14 property within a one mile ONE-MILE radius of a premises proposed to be 15 licensed and who filed a written request with the department to speak in 16 favor of or opposition to the issuance of the license no later than sixty 17 days after the filing of the application or fifteen days after action by 18 the local governing body, whichever is sooner. 19

3. "Beer" means any beverage obtained by the alcoholic 20 fermentation, infusion or decoction of barley malt, hops, or other 21 ingredients not drinkable, or any combination of them. 22

4. "Board" means the state liquor board. 23 5. "Bona fide guest" means: 24 (a) An individual who is personally familiar to the member, who is 25

personally sponsored by the member and whose presence as a guest is in 26 response to a specific and personal invitation. 27

(b) In the case of a club that meets the criteria prescribed in 28 paragraph 7, subdivision (a) of this section, a current member of the 29 armed services of the United States who presents proper military 30 identification and any member of a recognized veterans' organization of 31 the United States and of any country allied with the United States during 32 current or past wars or through treaty arrangements. 33

6. "Broken package" means any container of spirituous liquor on 34 which the United States tax seal has been broken or removed, or from which 35 the cap, cork or seal placed thereupon by the manufacturer has been 36 removed. 37

7. "Club" includes any of the following organizations where the 38 sale of spirituous liquor for consumption on the premises is made ONLY to 39 members, only SPOUSES OF MEMBERS, FAMILIES OF MEMBERS, BONA FIDE GUESTS OF 40 MEMBERS AND GUESTS AT OTHER EVENTS AUTHORIZED IN THIS TITLE: 41

(a) A post, chapter, camp or other local unit composed solely of 42 veterans and its duly recognized auxiliary that has been chartered by the 43 Congress of the United States for patriotic, fraternal or benevolent 44

HB 2334

- 2 -

purposes and that has, as the owner, lessee or occupant, operated an 1 establishment for that purpose in this state. 2

(b) A chapter, aerie, parlor, lodge or other local unit of an 3 American national fraternal organization that has, as the owner, lessee or 4 occupant, operated an establishment for fraternal purposes in this state. 5 An American national fraternal organization as used in this subdivision 6 shall actively operate in not less than AT LEAST thirty-six states or have 7 been in active continuous existence for not less than AT LEAST twenty 8 years. 9

(c) A hall or building association of a local unit mentioned in 10 subdivisions (a) and (b) of this paragraph, all of the capital stock of 11 which is owned by the local unit or the members, and that operates the 12 clubroom facilities of the local unit. 13

(d) A golf club that has more than fifty bona fide members and that 14 owns, maintains or operates a bona fide golf links together with a 15 clubhouse. 16

(e) A social club with more than one hundred bona fide members who 17 are actual residents of the county in which it is located, that owns, 18 maintains or operates club quarters, that is authorized and incorporated 19 to operate as a nonprofit club under the laws of this state, and that has 20 been continuously incorporated and operating for a period of not less than 21 AT LEAST one year. The club shall have had, during this one-year period, 22 a bona fide membership with regular meetings conducted at least once each 23 month, and the membership shall be and shall have been actively engaged in 24 carrying out the objects of the club. The club's membership shall consist 25 of bona fide dues paying DUES-PAYING members paying at least six dollars 26 per year, payable monthly, quarterly or annually, which have been recorded 27 by the secretary of the club, and the members at the time of application 28 for a club license shall be in good standing having for at least one full 29 year paid dues. At least fifty-one percent of the members shall have 30 signified their intention to secure a social club license by personally 31 signing a petition, on a form prescribed by the board, which shall also 32 include the correct mailing address of each signer. The petition shall 33 not have been signed by a member at a date earlier than one hundred eighty 34 days before the filing of the application. The club shall qualify for 35 exemption from the payment of state income taxes under title 43. It is 36 the intent of this subdivision that a license shall not be granted to a 37 club that is, or has been, primarily formed or activated to obtain a 38 license to sell liquor, but solely to a bona fide club, where the sale of 39 liquor is incidental to the main purposes of the club. 40

(f) An airline club operated by or for airlines that are 41 certificated by the United States government and that maintain or operate 42 club quarters located at airports with international status. 43

8. "Company" or "association", when used in reference to a 44 corporation, includes successors or assigns. 45

HB 2334

- 3 -

9. "Control" means the power to direct or cause the direction of 1 the management and policies of an applicant or licensee, whether through 2 the ownership of voting securities or a partnership interest, by agreement 3 or otherwise. Control is presumed to exist if a person has the direct or 4 indirect ownership of or power to vote ten percent or more of the 5 outstanding voting securities of the applicant or licensee or to control 6 in any manner the election of one or more of the directors of the 7 applicant or licensee. In the case of a partnership, control is presumed 8 to mean the general partner or a limited partner who holds ten percent or 9 more of the voting rights of the partnership. For the purposes of 10 determining the percentage of voting securities owned, controlled or held 11 by a person, there shall be aggregated with the voting securities 12 attributed to the person the voting securities of an officer, partner, 13 employee or agent of the person or a spouse, parent or child of the 14 person. Control is also presumed to exist if a creditor of the applicant 15 or licensee holds a beneficial interest in ten percent or more of the 16 liabilities of the licensee. The presumptions in this paragraph regarding 17 control are rebuttable. 18

10. "Controlling person" means a person directly or indirectly 19 possessing control of an applicant or licensee. 20

11. "Craft distiller" means a distiller in the United States or in 21 a territory or possession of the United States that holds a license 22 pursuant to section 4-205.10. 23

12. "Department" means the department of liquor licenses and 24 control. 25

13. "Director" means the director of the department of liquor 26 licenses and control. 27

14. "Distilled spirits" includes alcohol, brandy, whiskey, rum, 28 tequila, mescal, gin, absinthe, a compound or mixture of any of them or of 29 any of them with any vegetable or other substance, alcohol bitters, 30 bitters containing alcohol, fruits preserved in ardent spirits, and any 31 alcoholic mixture or preparation, whether patented or otherwise, that may 32 in sufficient quantities produce intoxication. 33

15. "Employee" means any person who performs any service on 34 licensed premises on a full-time, part-time or contract basis with consent 35 of the licensee, whether or not the person is denominated an employee, 36 independent contractor or otherwise. Employee does not include a person 37 exclusively on the premises for musical or vocal performances, for repair 38 or maintenance of the premises or for the delivery of goods to the 39 licensee. 40

16. "Farm winery" means a winery in the United States or in a 41 territory or possession of the United States that holds a license pursuant 42 to section 4-205.04. 43

17. "Government license" means a license to serve and sell 44 spirituous liquor on specified premises available only to a state agency, 45

HB 2334

- 4 -

state board, state commission, county, city, town, community college or 1 state university or the national guard or Arizona coliseum and exposition 2 center on application by the governing body of a state agency, state 3 board, state commission, county, city, town, community college or state 4 university or the national guard or Arizona exposition and state fair 5 board. 6

18. "Legal drinking age" means twenty-one years of age or older. 7 19. "License" means a license or an interim retail permit issued 8

pursuant to this title. 9 20. "Licensee" means a person who has been issued a license or an 10

interim retail permit pursuant to this title or a special event licensee. 11 21. "License fees" means fees collected for license issuance, 12

license application, license renewal, interim permit issuance and license 13 transfer between persons or locations. 14

22. "Manager" means a natural person who meets the standards 15 required of licensees and who has authority to organize, direct, carry on, 16 control or otherwise operate a licensed business on a temporary or 17 full-time basis. 18

23. "Microbrewery" means a brewery in the United States or in a 19 territory or possession of the United States that meets the requirements 20 of section 4-205.08. 21

24. "Off-sale retailer" means any person operating a bona fide 22 regularly established retail liquor store selling spirituous liquors, 23 wines and beer, and any established retail store selling commodities other 24 than spirituous liquors and engaged in the sale of spirituous liquors only 25 in the original unbroken package, to be taken away from the premises of 26 the retailer and to be consumed off the premises. 27

25. "On-sale retailer" means any person operating an establishment 28 where spirituous liquors are sold in the original container for 29 consumption on or off the premises or in individual portions for 30 consumption on the premises. 31

26. "Permanent occupancy" means the maximum occupancy of the 32 building or facility as set by the office of the state fire marshal for 33 the jurisdiction in which the building or facility is located. 34

27. "Person" includes a partnership, limited liability company, 35 association, company or corporation, as well as a natural person. 36

28. "Premises" or "licensed premises" means the area from which the 37 licensee is authorized to sell, dispense or serve spirituous liquors under 38 the provision of the license. Premises or licensed premises includes a 39 patio that is not contiguous to the remainder of the premises or licensed 40 premises if the patio is separated from the remainder of the premises or 41 licensed premises by a public or private walkway or driveway not to exceed 42 thirty feet, subject to rules the director may adopt to establish criteria 43 for noncontiguous premises. 44

29. "Registered mail" includes certified mail. 45

HB 2334

- 5 -

30. "Registered retail agent" means any person who is authorized 1 pursuant to section 4-222 to purchase spirituous liquors for and on behalf 2 of himself and other retail licensees. 3

31. "Repeated acts of violence" means: 4 (a) For licensed premises with a permanent occupancy of two hundred 5

or fewer persons, two or more acts of violence occurring within seven days 6 or three or more acts of violence occurring within thirty days. 7

(b) For licensed premises with a permanent occupancy of more than 8 two hundred but not more than four hundred persons, four or more acts of 9 violence within thirty days. 10

(c) For licensed premises with a permanent occupancy of more than 11 four hundred but not more than six hundred fifty persons, five or more 12 acts of violence within thirty days. 13

(d) For licensed premises with a permanent occupancy of more than 14 six hundred fifty but not more than one thousand fifty persons, six or 15 more acts of violence within thirty days. 16

(e) For licensed premises with a permanent occupancy of more than 17 one thousand fifty persons, seven or more acts of violence within thirty 18 days. 19

32. "Sell" includes soliciting or receiving an order for, keeping 20 or exposing for sale, directly or indirectly delivering for value, 21 peddling, keeping with intent to sell and trafficking in. 22

33. "Spirituous liquor" includes alcohol, brandy, whiskey, rum, 23 tequila, mescal, gin, wine, porter, ale, beer, any malt liquor or malt 24 beverage, absinthe, a compound or mixture of any of them or of any of them 25 with any vegetable or other substance, alcohol bitters, bitters containing 26 alcohol, any liquid mixture or preparation, whether patented or otherwise, 27 which produces intoxication, fruits preserved in ardent spirits, and 28 beverages containing more than one-half of one percent of alcohol by 29 volume. 30

34. "Vehicle" means any means of transportation by land, water or 31 air, and includes everything made use of in any way for such 32 transportation. 33

35. "Vending machine" means a machine that dispenses merchandise 34 through the means of coin, token, credit card or other nonpersonal means 35 of accepting payment for merchandise received. 36

36. "Veteran" means a person who has served in the United States 37 air force, army, navy, marine corps or coast guard, as an active nurse in 38 the services of the American red cross, in the army and navy nurse corps 39 in time of war, or in any expedition of the armed forces of the United 40 States, and who has received a discharge other than dishonorable. 41

37. "Voting security" means any security presently entitling the 42 owner or holder of the security to vote for the election of directors of 43 an applicant, OR A licensee or controlling person. 44

HB 2334

- 6 -

38. "Wine" means the product obtained by the fermentation of 1 grapes, other agricultural products containing natural or added sugar or 2 cider or any such alcoholic beverage fortified with grape brandy and 3 containing not more than twenty-four percent of alcohol by volume. 4

Sec. 2. Section 4-112, Arizona Revised Statutes, is amended to 5 read: 6

4-112. Powers and duties of board and director of department 7 of liquor licenses and control; investigations; 8 county and municipal regulation 9

A. The board shall: 10 1. Grant and deny applications in accordance with the provisions of 11

this title. 12 2. Adopt rules in order to carry out the provisions of this 13

section. 14 3. Hear appeals and hold hearings as provided in this section. 15 B. Except as provided in subsection A of this section, the director 16

shall administer the provisions of this title, including: 17 1. Adopting rules: 18 (a) For carrying out the provisions of this title. 19 (b) For the proper conduct of the business to be carried on under 20

each specific type of spirituous liquor license. 21 (c) To enable and assist state officials and political subdivisions 22

to collect taxes levied or imposed in connection with spirituous liquors. 23 (d) For the issuance and revocation of certificates of registration 24

of retail agents, including provisions governing the shipping, storage and 25 delivery of spirituous liquors by registered retail agents, the keeping of 26 records and the filing of reports by registered retail agents. 27

(e) To establish requirements for licensees under section 4-209, 28 subsection B, paragraph 12. 29

2. Subject to title 41, chapter 4, article 4, employing necessary 30 personnel and fixing their compensation pursuant to section 38-611. 31

3. Keeping an index record which shall be THAT IS a public record 32 open to public inspection and shall contain THAT CONTAINS the name and 33 address of each licensee and the name and address of any person having an 34 interest, either legal or equitable, in each license as shown by any 35 written document, which document shall be THAT IS placed on file in the 36 office of the board. 37

4. Providing the board with such supplies and personnel as may be 38 directed by the board. 39

5. Responding in writing to any law enforcement agency that submits 40 an investigative report to the department relating to a violation of this 41 title, setting forth what action, if any, the department has taken or 42 intends to take on the report and, if the report lacks sufficient 43 information or is otherwise defective for use by the department, what the 44 agency must do to remedy the report. 45

HB 2334

- 7 -

6. Taking such steps as THAT are necessary to maintain effective 1 liaison with the department of public safety and all local law enforcement 2 agencies in the enforcement of this title including the laws of this state 3 against the consumption of spirituous liquor by persons under the legal 4 drinking age. 5

7. Providing training to law enforcement agencies in the proper 6 investigation and reporting of violations of this title. 7

C. The director shall establish within the department a separate 8 investigations unit which THAT has as its sole responsibility the 9 investigation of compliance with this title including the investigation of 10 licensees alleged to have sold or distributed spirituous liquor in any 11 form to persons under the legal drinking age. Investigations conducted by 12 this unit may include covert undercover investigations. 13

D. All employees of the department of liquor licenses and control, 14 except members of the state liquor board and the director of the 15 department, shall be employed by the department in the manner prescribed 16 by the department of administration. 17

E. The director may enter into a contract or agreement with any 18 public agency for any joint or cooperative action as provided for by title 19 11, chapter 7, article 3. 20

F. The board or the director may take evidence, administer oaths or 21 affirmations, issue subpoenas requiring attendance and testimony of 22 witnesses, cause depositions to be taken and require by subpoena duces 23 tecum the production of books, papers and other documents which THAT are 24 necessary for the enforcement of this title. Proceedings held during the 25 course of a confidential investigation are exempt from title 38, chapter 26 3, article 3.1. If a person refuses to obey a subpoena or fails to answer 27 questions as provided by this subsection, the board or the director may 28 apply to the superior court in the manner provided in section 29 12-2212. The board or director may serve subpoenas by personal service or 30 certified mail, return receipt requested. 31

G. The director may: 32 1. Examine books, records and papers of a licensee. 33 2. Require applicants, licensees, employees who serve, sell or 34

furnish spirituous liquors to retail customers, managers and managing 35 agents to take training courses approved by the director in spirituous 36 liquor handling and spirituous liquor laws and rules. The director shall 37 adopt rules that set standards for approving training courses. THE 38 DIRECTOR MAY SUSPEND OR REVOKE THE APPROVAL OF TRAINERS WHO DO NOT ADHERE 39 TO DEPARTMENT COURSE ADMINISTRATION REQUIREMENTS OR WHO DO NOT MEET COURSE 40 STANDARDS. ANY PENALTY ISSUED PURSUANT TO THIS SUBSECTION MAY BE APPEALED 41 TO THE BOARD PURSUANT TO SECTION 4-210.02 AS IF THE ORDER WAS A SANCTION 42 AGAINST A LICENSEE. The department's licensed investigators may 43 participate and receive compensation as lecturers at approved training 44 courses within this state's jurisdiction that are conducted by other 45

HB 2334

- 8 -

entities but shall not participate in in-house training programs for 1 licensees. 2

3. Delegate to employees of the department authority to exercise 3 powers of the director in order to administer the department. 4

4. Regulate signs that advertise a spirituous liquor product at 5 licensed retail premises. 6

5. Cause to be removed from the marketplace spirituous liquor that 7 may be contaminated. 8

6. Regulate the age and conduct of erotic entertainers at licensed 9 premises. The age limitation governing these erotic entertainers may be 10 different from other employees of the licensee. 11

7. Issue and enforce cease and desist orders against any person or 12 entity that sells beer, wine or spirituous liquor without an appropriate 13 license or permit. 14

8. Confiscate wines carrying a label including a reference to 15 Arizona or any Arizona city, town or place unless at least seventy-five 16 per cent PERCENT by volume of the grapes used in making the wine were 17 grown in this state. 18

9. Accept and expend private grants of monies, gifts and devises 19 for conducting educational programs for parents and students on the 20 repercussions of underage alcohol consumption. State general fund monies 21 shall not be expended for the purposes of this paragraph. If the director 22 does not receive sufficient monies from private sources to carry out the 23 purposes of this paragraph, the director shall not provide the educational 24 programs prescribed in this paragraph. Grant monies received pursuant to 25 this paragraph are nonlapsing and do not revert to the state general fund 26 at the close of the fiscal year. 27

10. Procure fingerprint scanning equipment and provide fingerprint 28 services to license applicants and licensees. The department may charge a 29 fee for providing these services. 30

11. Accept electronic signatures on all department and licensee 31 forms and documents and applications. The director may adopt requirements 32 that would require facsimile signatures to be followed by original 33 signatures within a specified time period. 34

H. A county or municipality may enact and enforce ordinances 35 regulating the age and conduct of erotic entertainers at licensed premises 36 in a manner at least as restrictive as rules adopted by the director. 37

Sec. 3. Title 4, chapter 1, article 2, Arizona Revised Statutes, is 38 amended by adding section 4-116.01, to read: 39

4-116.01. Receipts from sampling privilege and growler 40 permits 41

NOTWITHSTANDING ANY OTHER LAW, ALL RECEIPTS DERIVED FROM SAMPLING 42 PRIVILEGE AND GROWLER PERMIT APPLICATIONS ARE APPROPRIATED TO THE 43 DEPARTMENT. THE DEPARTMENT SHALL DEPOSIT MONIES RECEIVED PURSUANT TO THIS 44 SECTION IN THE LIQUOR LICENSES FUND ESTABLISHED BY SECTION 4-120. THE 45

HB 2334

- 9 -

AMOUNT DEPOSITED INTO THE LIQUOR LICENSES FUND PURSUANT TO THIS SECTION 1 SHALL BE WITHOUT REGARD TO THE AMOUNT APPROPRIATED TO THE DEPARTMENT BY 2 THE LEGISLATURE.END_STATUTE 3

Sec. 4. Section 4-120, Arizona Revised Statutes, is amended to 4 read: 5

4-120. Liquor licenses fund; exemption 6 A. The liquor licenses fund is established consisting of monies 7

deposited pursuant to section SECTIONS 4-115 AND 4-116.01. The department 8 of liquor licenses and control shall administer the fund. The amount 9 deposited in the fund each year shall not exceed the amount appropriated 10 by the legislature. 11

B. Monies in the fund are subject to legislative appropriation. 12 C. Monies in the fund are exempt from the provisions of section 13

35-190 relating to lapsing of appropriations, except that any monies 14 remaining in the fund in excess of seven hundred thousand dollars at the 15 end of each fiscal year reverts REVERT to the state general fund. 16

Sec. 5. Section 4-201, Arizona Revised Statutes, is amended to 17 read: 18

4-201. Licensing; application procedure in city, town or 19 county; burden of proof 20

A. A person desiring a license to manufacture, sell or deal in 21 spirituous liquors shall make application to the director on a form 22 prescribed and furnished by the director. 23

B. A person desiring a license within an incorporated city or town 24 shall make the application in triplicate and shall file the copies with 25 the director. The director shall remit two copies to the city or town 26 clerk. The city or town clerk shall immediately file one copy in the 27 clerk's office and post the other for a period of twenty days in a 28 conspicuous place on the front of the premises where the business is 29 proposed to be conducted, with a statement requiring any natural person 30 who is a bona fide resident residing or owning or leasing property within 31 a one mile radius from the premises proposed to be licensed, and who is in 32 favor of or opposed to the issuance of the license, to file written 33 arguments in favor of or opposed to the issuance of the license with the 34 clerk within twenty days after the date of posting. The posting shall be 35 limited to a copy of the license application and shall not contain any 36 attachments filed with the application. The written argument shall 37 contain the natural person's complete name, street address or post office 38 box address and written or electronic signature. If the written arguments 39 are filed by a person on behalf of a corporation or other legal entity or 40 association, the written arguments must be accompanied by a copy of the 41 entity's organizing document, a designation of the office or position that 42 the person holds within the organization and a copy of the written 43 appointment of the person to speak on behalf of the organization. If the 44 written arguments are filed by a neighborhood association, block watch or 45

HB 2334

- 10 -

other unincorporated association, written arguments must be accompanied by 1 a letter of authority designating that person as a spokesperson. The 2 posting shall contain substantially the following: 3

Notice 4 A hearing on a liquor license application shall be held before 5 the local governing body at the following date, time and 6 place: 7 (Insert date, time and address) 8 The local governing body will recommend to the state liquor 9 board whether the board should grant or deny the license. The 10 state liquor board may hold a hearing to consider the 11 recommendation of the local governing body. Any person 12 residing or owning or leasing property within a one-mile 13 radius may contact the state liquor board in writing to 14 register as a protestor. To request information regarding 15 procedures before the board and notice of any board hearings 16 regarding this application, contact the state liquor board at: 17 (Insert address and telephone number). 18

No arguments shall be filed or accepted by the city or town clerk 19 thereafter. This subsection shall not be construed to DOES NOT prevent a 20 bona fide resident residing or owning or leasing property within a 21 one-mile radius from the premises proposed to be licensed from testifying 22 in favor of or in opposition to the issuance of the license, regardless of 23 whether or not the person is a user or nonuser of spirituous liquor. 24

C. The governing body of the city, town or county shall then enter 25 an order recommending approval or disapproval within sixty days after THE 26 filing of the application and shall file a certified copy of the order 27 with the director. If the recommendation is for disapproval, a statement 28 of the specific reasons containing a summary of the testimony or other 29 evidence supporting the recommendation for disapproval shall be attached 30 to the order. All petitions submitted to the governing body within the 31 twenty-day period for filing protests shall be transmitted to the director 32 with the certified copy of the order. 33

D. If a person applies for a license to conduct a spirituous liquor 34 business outside an incorporated city or town, the director shall remit 35 two copies of the application to the clerk of the board of supervisors of 36 the county where the applicant desires to do business, and the proceedings 37 by the clerk and board of supervisors shall be as provided for cities and 38 towns. 39

E. On receipt of an application for a spirituous liquor license, 40 the director shall set the application for A hearing by the board on a 41 date following the expiration of the time fixed for the submitting of the 42 certified order by the governing body of the city or town or the board of 43 supervisors. If the city or town or the county recommends approval of the 44 license no A hearing is NOT required unless the director, the board or any 45

HB 2334

- 11 -

aggrieved party requests a hearing on the grounds that the public 1 convenience and the best interest of the community will not be 2 substantially served if a license is issued. Any natural person residing 3 or owning or leasing property within a one mile ONE-MILE radius of the 4 proposed location may file a written protest with the director ON A FORM 5 PRESCRIBED BY THE DIRECTOR not later than fifteen calendar days after 6 action by the local governing body or sixty days after THE filing OF the 7 application, whichever is sooner. The written argument shall contain the 8 natural person's complete name, street address or post office box address 9 and written or electronic signature. If the written arguments are filed 10 by a person on behalf of a corporation or other legal entity or 11 association, the written arguments must be accompanied by a copy of the 12 entity's organizing document, a designation of the office or position that 13 the person holds within the organization and a copy of the written 14 appointment of the person to speak on behalf of the organization. If the 15 written arguments are filed by a neighborhood association, block watch or 16 other unincorporated association, written arguments must be accompanied by 17 a letter of authority designating that person as a spokesperson. If no 18 hearing is requested by the director, the board or any aggrieved party, 19 the application may be approved by the director. If the recommendation is 20 for disapproval of an application, the board shall hold a hearing. If the 21 city, town or county recommends approval of the license pursuant to 22 subsection C of this section or makes no recommendation, the director may 23 cancel the hearing and issue the license unless the board or any aggrieved 24 party requests a hearing. If the reason for the protest is clearly 25 removed or deemed satisfied by the director, the board shall cancel the 26 hearing. If the board cancels the hearing, the department may 27 administratively issue an order without the applicant licensee or other 28 parties present. The certified order, the reasons contained in the order 29 and the summary of the testimony and other evidence supporting the city, 30 town or county disapproval of the recommendation shall be read into the 31 record before the board and shall be considered as evidence by the 32 board. The board shall consider the certified order together with other 33 facts and a report of the director relating to the qualifications of the 34 applicant. If the governing body of the city or town or the board of 35 supervisors fails to return to the director, as provided in subsections C 36 and D of this section, its order of disapproval, no hearing is 37 required. An application shall be approved or disapproved within one 38 hundred five days after THE filing of the application. If, after a 39 hearing by the board where a license has been approved, a formal written 40 order is not entered within thirty days after the hearing, the decision of 41 the board shall be IS deemed entered on the thirtieth day after the 42 hearing. 43

F. A hearing may be conducted by an administrative law judge at the 44 request of the board to make findings and recommendations for use by the 45

HB 2334

- 12 -

board in determining whether to grant or deny a license. The 1 administrative law judge shall submit a report of findings to the board 2 within twenty days after the hearing. The board may affirm, reverse, 3 adopt, modify, supplement, amend or reject the administrative law judge's 4 report in whole or in part. 5

G. Except for a person to person PERSON-TO-PERSON transfer of a 6 transferable license for use at the same location and as otherwise 7 provided in section 4-203, subsection A, in all proceedings before the 8 governing body of a city or town, the board of supervisors of a county or 9 the board, the applicant bears the burden of showing that the public 10 convenience requires and that the best interest of the community will be 11 substantially served by the issuance of a license. 12

H. In order to prevent the proliferation of spirituous liquor 13 licenses the department may deny a license to a business on the grounds 14 that such THE business is inappropriate for the sale of spirituous 15 liquor. An inappropriate business is one that cannot clearly demonstrate 16 that the sale of spirituous liquor is directly connected to its primary 17 purpose and that the sale of spirituous liquor is not merely incidental to 18 its primary purpose. 19

I. The board shall adopt, by rule, guidelines setting forth THAT 20 STATE criteria for use in determining whether the public convenience 21 requires and the best interest of the community will be substantially 22 served by the issuance or transfer of a liquor license at the location 23 applied for. These guidelines shall govern the recommendations and other 24 approvals of the department and the local governing authority. 25

J. If the governing body of a city or town recommends disapproval 26 by a two-thirds vote of the members present and voting on an application 27 for the issuance or transfer of a spirituous liquor license that, if 28 approved, would result in a license being issued at a location either 29 having no license or having a license of a different series, the 30 application shall not be approved unless the board decides to approve the 31 application by a two-thirds vote of the members present and voting. 32

Sec. 6. Section 4-203, Arizona Revised Statutes, is amended to 33 read: 34

4-203. Licenses; issuance; transfer; reversion to state 35 A. A spirituous liquor license shall be issued only after 36

satisfactory showing of the capability, qualifications and reliability of 37 the applicant and, with the exception of wholesaler, producer, government 38 or club licensees, that the public convenience requires and that the best 39 interest of the community will be substantially served by the issuance. 40 If an application is filed for the issuance of a transferable or 41 nontransferable license, other than for a craft distiller license, a 42 microbrewery license or a farm winery license, for a location that on the 43 date the application is filed has a valid license of the same series, or 44 in the case of a restaurant license application filed for a location with 45

HB 2334

- 13 -

a valid hotel-motel license, issued at that location, there shall be a 1 rebuttable presumption that the public convenience and best interest of 2 the community at that location was established at the time the location 3 was previously licensed. The presumption may be rebutted by competent 4 contrary evidence. The presumption shall not apply once the licensed 5 location has not been in use for more than one hundred eighty days and the 6 presumption shall not extend to the personal qualifications of the 7 applicant. 8

B. The license shall be to manufacture, sell or deal in spirituous 9 liquors only at the place and in the manner provided in the license. A 10 separate license shall be issued for each specific business, and each 11 shall specify: 12

1. The particular spirituous liquors that the licensee is 13 authorized to manufacture, sell or deal in. 14

2. The place of business for which issued. 15 3. The purpose for which the liquors may be manufactured or sold. 16 C. A spirituous liquor license issued to a bar, a liquor store or a 17

beer and wine bar shall be transferable as to any permitted location 18 within the same county, provided such IF THE transfer meets the 19 requirements of an original application. A spirituous liquor license may 20 be transferred to a person qualified to be a licensee, provided such IF 21 THE transfer is pursuant to either judicial decree, nonjudicial 22 foreclosure of a legal or equitable lien, including security interests 23 held by financial institutions pursuant to section 4-205.05, a sale of the 24 license, a bona fide sale of the entire business and stock in trade, or 25 such other bona fide transactions as may be THAT ARE provided for by rule. 26 Any change in ownership of the business of a licensee, directly or 27 indirectly, as defined by rule is deemed a transfer, EXCEPT THAT THERE IS 28 NO TRANSFER IF A NEW FICTITIOUS PERSON IS ADDED TO THE OWNERSHIP OF A 29 LICENSEE'S BUSINESS BUT THE CONTROLLING PERSONS REMAIN IDENTICAL TO THE 30 CONTROLLING PERSONS THAT HAVE BEEN PREVIOUSLY DISCLOSED TO THE DIRECTOR AS 31 PART OF THE LICENSEE'S EXISTING OWNERSHIP. 32

D. All applications for a new license pursuant to section 4-201 or 33 for a transfer to a new location pursuant to subsection C of this section 34 shall be filed with and determined by the director, except when the 35 governing body of the city or town or the board of supervisors receiving 36 an application pursuant to section 4-201 orders disapproval of the 37 application or when the director, the state liquor board or any aggrieved 38 party requests a hearing. The application shall then be presented to the 39 state liquor board, and the new license or transfer shall not become 40 effective unless approved by the state liquor board. 41

E. A person who assigns, surrenders, transfers or sells control of 42 a liquor license or business that has a spirituous liquor license shall 43 notify the director within thirty business days after the assignment, 44 surrender, transfer or sale. No A spirituous liquor license shall NOT be 45

HB 2334

- 14 -

leased or subleased. A concession agreement entered into under section 1 4-205.03 is not considered a lease or sublease in violation of this 2 section. 3

F. If a person other than those persons originally licensed 4 acquires control over a license or licensee, the person shall file notice 5 of the acquisition with the director within thirty business days after the 6 acquisition of control and a list of officers, directors or other 7 controlling persons on a form prescribed by the director. There is no 8 acquisition of control if a new person is added to the ownership of a 9 licensee's business but the controlling persons remain identical to the 10 controlling persons that have been previously disclosed to the director as 11 part of the licensee's existing ownership. All officers, directors or 12 other controlling persons shall meet the qualifications for licensure as 13 prescribed by this title. On request, the director shall conduct a 14 preinvestigation before the assignment, sale or transfer of control of a 15 license or licensee, the reasonable costs of which, not to exceed MORE 16 THAN one thousand dollars, shall be borne by the applicant. The 17 preinvestigation shall determine whether the qualifications for licensure 18 as prescribed by this title are met. On receipt of notice of an 19 acquisition of control or request of a preinvestigation, the director, 20 within fifteen days after receipt, shall forward the notice of the 21 acquisition of control to the local governing body of the city or town, if 22 the licensed premises is in an incorporated area, or the county, if the 23 licensed premises is in an unincorporated area. The director shall 24 include in the notice to the local governing body written instructions on 25 how the local governing body may examine, free of charge, the results of 26 the department's investigation regarding the capabilities, qualifications 27 and reliability of all officers, directors or other controlling persons 28 listed in the application for acquisition of control. The local governing 29 body may provide the director with a recommendation, either in favor of or 30 against the acquisition of control, within sixty days after the director 31 mails the notice, but section 4-201 does not apply to the acquisition of 32 control provided for in this section. A local governing body may charge 33 not more than one fee, regardless of the number of licenses held by the 34 applicant, for review of one or more applications for acquisition of 35 control submitted to the department at the same time and for the same 36 entity. Within one hundred five days after filing THE notice of the 37 acquisition of control, the director shall determine whether the applicant 38 is qualified, capable and reliable for licensure. A recommendation by the 39 local governing body against the acquisition of control or denial by the 40 director shall be set for a hearing before the board. The person who has 41 acquired control of a license or licensee has the burden of an original 42 application at the hearing, and the board shall make its determination 43 pursuant to section 4-202 and this section with respect to capability, 44 reliability and qualification. 45

HB 2334

- 15 -

G. A licensee who holds a license in nonuse status for more than 1 five months shall be required to pay a one hundred dollar surcharge for 2 each month thereafter. The surcharge shall be paid at the time the 3 license is returned to active status. A license automatically reverts to 4 the state after being held in continuous nonuse in excess of FOR MORE THAN 5 thirty-six months. The director may waive the surcharge and may extend 6 the time period provided in this subsection for good cause if the licensee 7 files a written request for an extension of time to place the license in 8 active status before the date of the automatic reversion. A license shall 9 not be deemed to have gone into active status if the license is 10 transferred to a location that at the time of or immediately before the 11 transfer had an active license of the same type, unless the licenses are 12 under common ownership or control. 13

H. A restructuring of a licensee's business is neither NOT an 14 acquisition of control, nor a transfer of a spirituous liquor license nor 15 OR the issuance of a new spirituous liquor license if both of the 16 following apply: 17

1. All of the controlling persons of the licensee and the new 18 business entity are identical. 19

2. There is no change in control or beneficial ownership. 20 I. If subsection H of this section applies, the licensee's history 21

of violations of this title is the history of the new business entity. 22 The director may prescribe a form and shall require the applicant to 23 provide the necessary information to ensure compliance with this 24 subsection and subsections F and G of this section. 25

J. Notwithstanding subsection B of this section, the holder of a 26 retail license having off-sale privileges may deliver spirituous liquor 27 off of the licensed premises in connection with the sale of spirituous 28 liquor. The licensee may maintain a delivery service and shall be liable 29 for any violation committed in connection with any sale or delivery of 30 spirituous liquor, provided that such THE delivery is made by an employee 31 who is at least twenty-one years of age. The retail licensee shall 32 collect payment for the price of the spirituous liquor no later than at 33 the time of delivery. The director shall adopt rules that set operational 34 limits for the delivery of spirituous liquors by the holder of a retail 35 license having off-sale privileges. For the purposes of this subsection, 36 an independent contractor or the employee of an independent contractor is 37 deemed to be an employee of the licensee when making a sale or delivery of 38 spirituous liquor for the licensee. 39

K. Except as provided in subsection J of this section, Arizona 40 licensees may transport spirituous liquors for themselves in vehicles 41 owned, leased or rented by such THE licensee. 42

L. Notwithstanding subsection B of this section AND SECTION 43 4-206.01, SUBSECTION K, PARAGRAPH 8, an off-sale retail licensee may 44 provide consumer tasting of wines off of the licensed premises. 45

HB 2334

- 16 -

M. The director may adopt reasonable rules to protect the public 1 interest and prevent abuse by licensees of the activities permitted such 2 licensees by subsections J and L of this section. 3

N. Failure to pay any surcharge prescribed by subsection G of this 4 section or failure to report the period of nonuse of a license shall be 5 grounds for revocation of the license or grounds for any other sanction 6 provided by this title. The director may consider extenuating 7 circumstances if control of the license is acquired by another party in 8 determining whether or not to impose any sanctions under this subsection. 9

O. If a licensed location has not been in use for three years, the 10 location must requalify for a license pursuant to subsection A of this 11 section and shall meet the same qualifications required for issuance of a 12 new license except when the director deems that the nonuse of the location 13 was due to circumstances beyond the licensee's control and an extension of 14 time has been granted pursuant to subsection G of this section. 15

P. If the licensee's interest is forfeited pursuant to section 16 4-210, subsection L, the location shall requalify for a license pursuant 17 to subsection A of this section and shall meet the same qualifications 18 required for issuance of a new license except when a bona fide lienholder 19 demonstrates mitigation pursuant to section 4-210, subsection K. 20

Q. The director may implement a procedure for the issuance of a 21 license with a licensing period of two years. 22

Sec. 7. Section 4-203.02, Arizona Revised Statutes, is amended to 23 read: 24

4-203.02. Special event license; rules 25 A. The director may issue on a temporary basis: 26 1. A daily on-sale special event license authorizing the sale of 27

spirituous liquor for consumption on the premises where sold. The fee for 28 the license is twenty-five dollars per day. The director shall transfer 29 the monies collected to the department of health services for the purpose 30 PURPOSES prescribed in title 36, chapter 18, article 2. 31

2. A daily off-sale special event license authorizing a charitable 32 auction for the sale of spirituous liquor for consumption off premises. 33

B. Before the director may issue a temporary special event license, 34 a special event that is to occur at an otherwise unlicensed location or by 35 a licensee at a location that is not fully within the licensee's existing 36 licensed premises must be approved by the board of supervisors of a 37 county, OR THE BOARD'S DESIGNEE, if the event is to be held in an 38 unincorporated area or by the governing body of the city or town, OR THE 39 GOVERNING BODY'S DESIGNEE, if the event is to be held in a city or town. 40 A DENIAL BY THE COUNTY, CITY OR TOWN MUST BE FORWARDED TO THE DIRECTOR 41 WITHIN NINETY DAYS AFTER THE SUBMISSION OF AN APPLICATION TO THE COUNTY, 42 CITY OR TOWN. FAILURE TO FORWARD A DENIAL TO THE DIRECTOR WITHIN NINETY 43 DAYS AFTER THE SUBMISSION OF AN APPLICATION IS DEEMED AS NO RECOMMENDATION 44 BY THE COUNTY, CITY OR TOWN. 45

HB 2334

- 17 -

C. The approval process prescribed in this section does not apply 1 to physical locations that are fully within premises THAT ARE licensed 2 pursuant to this title. 3

D. A physical location, other than a physical location that is 4 owned, operated, leased, managed or controlled by the United States, this 5 state or a city, town or county of this state, that is not licensed 6 pursuant to this title may not be issued more than a total of thirty days 7 of special event licenses during the same calendar year. All applications 8 for a special event license issued pursuant to this section must be 9 submitted to the department at least ten days before the scheduled 10 event. The director may waive the ten-day requirement for good cause 11 shown. 12

E. The director may only issue the special event license to a 13 political party or campaign committee supporting a candidate for public 14 office or a ballot measure, or a nonprofit entity that is organized as a 15 nonprofit corporation, limited liability company, trust or other entity in 16 this state or pursuant to the laws of another state AND that is eligible 17 for designation as a nonprofit entity under section 501(c) of the internal 18 revenue code of the United States. The nonprofit entity shall demonstrate 19 that it is in good standing in this state. An applicant for a special 20 event license may agree CONTRACT with a special event contractor to assist 21 the applicant FOR ASSISTANCE in selling and serving spirituous liquor at 22 the special event. The special event contractor shall be listed on the 23 application form. The director shall require a special event contractor 24 to provide THE controlling persons' identification and background 25 information deemed necessary to identify the special event contractor and 26 to demonstrate proof of the contractor's authority to conduct business in 27 this state, including providing copies of any required state or local 28 business licenses or permits. The department shall maintain a list of 29 special event contractors that have been employed by special event 30 licensees during the past year and that are not otherwise in penalty 31 status pursuant to subsection H OF THIS SECTION. A licensee holding a 32 currently active series 6, 7, 11 or 12 license may serve as the special 33 event contractor for a special event license without any additional 34 requirements. A new applicant for an initial special event license may be 35 required by the department to demonstrate it is qualified, capable and 36 reliable to conduct a special event. The department may require new 37 special event contractors and new special event licensees to require 38 persons who serve or sell spirituous liquor to patrons at the special 39 event to complete an approved training course in accordance with section 40 4-112, subsection G, paragraph 2. A special event contractor shall be IS 41 subject to the provisions of EXAMINATIONS CONDUCTED PURSUANT TO section 42 4-112, subsection G, paragraph 1. 43

F. The director may issue a special event license concurrently with 44 a wine festival license and a craft distillery festival license and may 45

HB 2334

- 18 -

approve the location of the wine festival license within an excluded area 1 of a special event license specifically described in each license. 2 Notwithstanding section 4-244, paragraphs 13 and 19, both licenses shall 3 permit the presence of purchased spirituous liquor in the possession of 4 the purchaser. 5

G. For the purposes of this section, a special event licensee or an 6 employee of a special event licensee and a special event contractor or an 7 employee of a special event contractor that has been retained for an 8 approved special event, may order or purchase spirituous liquor from the 9 holder of a license authorized to sell off-sale or a licensed 10 wholesaler. In the case of IF a nonprofit entity that has obtained a 11 special event license for the purpose of charitable fund-raising 12 activities, the nonprofit entity or special event contractor may receive 13 the spirituous liquor from a wholesaler, farm winery, microbrewery or 14 producer as a donation, except that a licensee licensed pursuant to 15 subsection A, paragraph 2 of this section may receive spirituous liquor 16 from a donor when the donor receives no remuneration or payment of any 17 kind, directly or indirectly, other than any tax benefits that might 18 result. Spirituous liquor may be dispensed and served at the special 19 event only by the following persons: 20

1. The special event licensee or an employee of the special event 21 licensee, unless the special event is at the premises of a licensed 22 retailer and the licensed retailer has agreed to dispense and serve the 23 spirituous liquor. 24

2. The special event contractor or an employee of the special event 25 contractor, unless the special event is at the premises of a licensed 26 retailer and the licensed retailer has agreed to dispense and serve the 27 spirituous liquor. 28

3. The producer or producers who furnished the spirituous liquor. 29 4. The wholesaler or wholesalers who furnished the spirituous 30

liquor. 31 H. In addition to all other actions that may be taken by the 32

director for A violation of this title or the regulations issued RULES 33 ADOPTED pursuant to this title by the special event licensee or special 34 event contractor, the department may limit the right of the licensee to 35 obtain a special event license for a period of up to one year or may limit 36 the right of the special event contractor to support any licensed special 37 event for a period OF up to one year. Any penalty issued pursuant to this 38 subsection may be appealed to the department BOARD pursuant to section 39 4-210.02 as if the order was a sanction against a licensee. An 40 organization that is issued a license pursuant to subsection A, 41 paragraph 2 of this section shall receive at least seventy-five percent of 42 the gross receipts of the auction. Up to twenty-five percent of the gross 43 receipts of a special event auction conducted pursuant to subsection A, 44 paragraph 2 of this section may be used to pay reasonable and necessary 45

HB 2334

- 19 -

expenses incurred in connection with the auction. All expenses shall be 1 supported by written contracts, invoices or receipts, which shall be made 2 available to the director on request. AN ORGANIZATION THAT IS ISSUED A 3 LICENSE PURSUANT TO SUBSECTION A, PARAGRAPH 2 OF THIS SECTION SHALL NOT 4 SELL AT AUCTION MORE THAN TWENTY CASES OF SPIRITUOUS LIQUOR ANNUALLY UNDER 5 A SPECIAL EVENT LICENSE. 6

I. The director may adopt those rules the director determines are 7 necessary to implement and administer this section including a limitation 8 on the number of times during a calendar year a qualified organization may 9 apply for and be issued a license under this section. The qualified 10 organization issued a license pursuant to subsection A, paragraph 1 of 11 this section must receive at least twenty-five percent of the gross 12 revenues of all spirituous liquor sold at the special events, which shall 13 be supported by a contract between the parties to be supplied at the time 14 of application. 15

J. At an event conducted UNDER A LICENSE ISSUED pursuant to 16 subsection A, paragraph 1 or 2 of this section, the licensee may conduct a 17 wine pull or distilled spirits pull of up to fifty bottles TWENTY CASES of 18 wine or AND UP TO TEN CASES OF distilled spirits PER DAY OF A LICENSED 19 SPECIAL EVENT. THE SPECIAL EVENT LICENSEE SHALL BE RESPONSIBLE FOR 20 COMPLIANCE WITH THE CASE LIMITS IN THIS SECTION. An organization that is 21 issued a license pursuant to subsection A, paragraph 2 of this section 22 shall not sell more than twenty cases of spirituous liquor annually under 23 a special event license. For the purposes of this subsection, a "wine 24 pull" or "distilled spirits pull" means an activity where, for a set 25 price, one or more attendees at a special event pay for the opportunity to 26 select at the event one or more bottles of wine or distilled spirits where 27 the variety and vintage are undisclosed. 28

K. Section 4-201 does not apply to the licenses provided for under 29 this section. 30

L. A licensed producer or wholesaler may donate spirituous liquor 31 directly to an organization that is issued a license pursuant to 32 subsection A of this section. The licensed producer or wholesaler shall 33 in such instances issue a net zero cost billing invoice in the name of the 34 special event licensee. All licensees making or receiving spirituous 35 liquor donations remain subject to the applicable limitations and 36 requirements set forth STATED in this title and in the rules adopted by 37 the department. 38

M. A licensed wholesaler may temporarily leave a delivery vehicle 39 and other items of equipment necessary for the sale or service of 40 spirituous liquor on the premises of a licensed special event for the 41 duration of the event and up to one business day before and after the 42 event. 43

N. The holder of a license authorized to sell off-sale or a 44 licensed wholesaler may leave purchased spirituous liquor products at a 45

HB 2334

- 20 -

special event if the products are properly described on a preliminary 1 billing invoice that is issued in the name of the special event 2 licensee. The holder of a license authorized to sell off-sale or the 3 licensed wholesaler has up to five business days after the special event 4 ends to make any necessary billing adjustments and issue a final billing 5 invoice to the special event licensee. Within one business day after the 6 conclusion of the special event, the special event licensee or a special 7 event contractor shall return unbroken packages of spirituous liquor to 8 the appropriate off-sale licensee or wholesaler subject to the applicable 9 rules of the United States alcohol and tobacco tax and trade bureau and 10 the policy of the applicable off-sale licensee or wholesaler. 11

O. The director may adopt rules deemed necessary to implement and 12 administer this section for special event contractors. 13

Sec. 8. Section 4-203.03, Arizona Revised Statutes, is amended to 14 read: 15

4-203.03. Farm winery festival license; farm winery fair 16 license; fee 17

A. The director, subject to the approval of the board of 18 supervisors for events to be held in an unincorporated area or the 19 governing body of a city or town for events to be held in a city or town, 20 may issue up to fifty wine festival licenses for each calendar year for 21 each licensed farm winery, for up to a total of one hundred fifty calendar 22 days per winery, authorizing sampling of farm winery products on the wine 23 festival premises, the sale of the products for consumption on the wine 24 festival premises and the sale of the products in original containers for 25 consumption off the wine festival premises. The fee for a farm winery 26 wine festival license is fifteen dollars per day for each event. 27

B. Any farm winery may apply for a wine festival license pursuant 28 to this section. 29

C. With the permission of the fair organizers, any farm winery is 30 authorized to allow sampling of farm winery products on the fair premises, 31 the sale of the products for consumption on the fair premises and the sale 32 of the products in original containers for consumption off of the fair 33 premises at any sanctioned county or state fair. The fee for a farm 34 winery fair license is fifteen dollars per day for each event. ON A 35 TEMPORARY BASIS A FARM WINERY FESTIVAL LICENSE THAT AUTHORIZES: 36

1. THE SAMPLING OF THE FARM WINERY PRODUCTS ON THE FARM WINERY 37 FESTIVAL PREMISES. 38

2. THE SALE OF PRODUCTS FOR CONSUMPTION ON THE FARM WINERY FESTIVAL 39 PREMISES. 40

3. THE SALE OF PRODUCTS IN THE ORIGINAL CONTAINER FOR CONSUMPTION 41 OFF THE FARM WINERY FESTIVAL PREMISES. 42

B. BEFORE THE DIRECTOR MAY ISSUE A FARM WINERY FESTIVAL LICENSE, A 43 FARM WINERY FESTIVAL THAT IS TO OCCUR AT AN OTHERWISE UNLICENSED LOCATION 44 OR AT A LOCATION THAT IS NOT FULLY WITHIN THE LICENSEE'S EXISTING LICENSED 45

HB 2334

- 21 -

PREMISES MUST BE APPROVED BY THE COUNTY BOARD OF SUPERVISORS, OR THE 1 BOARD'S DESIGNEE, IF THE EVENT IS TO BE HELD IN AN UNINCORPORATED AREA OR 2 BY THE GOVERNING BODY OF THE CITY OR TOWN, OR THE GOVERNING BODY'S 3 DESIGNEE, IF THE EVENT IS TO BE HELD IN A CITY OR TOWN. A DENIAL BY THE 4 COUNTY, CITY OR TOWN MUST BE FORWARDED TO THE DIRECTOR WITHIN NINETY DAYS 5 AFTER THE SUBMISSION OF AN APPLICATION TO THE COUNTY, CITY OR TOWN. 6 FAILURE TO FORWARD A DENIAL TO THE DIRECTOR WITHIN NINETY DAYS AFTER THE 7 SUBMISSION OF AN APPLICATION IS DEEMED AS NO RECOMMENDATION BY THE COUNTY, 8 CITY OR TOWN. 9

C. THE APPROVAL PROCESS PRESCRIBED IN THIS SECTION DOES NOT APPLY 10 TO PHYSICAL LOCATIONS THAT ARE FULLY LOCATED WITHIN A PREMISES THAT IS 11 LICENSED PURSUANT TO THIS TITLE. 12

D. THE DIRECTOR MAY ISSUE ONE OR MORE FARM WINERY FESTIVAL LICENSES 13 FOR EACH FARM WINERY LICENSED PURSUANT TO THIS TITLE, FOR A TOTAL OF UP TO 14 ONE HUNDRED FIFTY CALENDAR DAYS FOR EACH FARM WINERY. THE DIRECTOR MAY 15 ESTABLISH A FEE FOR EACH DAY OF EACH EVENT FOR A FARM WINERY FESTIVAL 16 LICENSE. 17

E. ANY FARM WINERY MAY APPLY FOR A FARM WINERY FESTIVAL LICENSE 18 PURSUANT TO THIS SECTION. 19

F. A REPRESENTATIVE OF THE LICENSED FARM WINERY MAY CONSUME SMALL 20 AMOUNTS OF THE PRODUCTS OF THE LICENSED FARM WINERY ON THE FESTIVAL 21 PREMISES FOR THE PURPOSE OF QUALITY CONTROL. THE WINE MAY INCLUDE WINE 22 PRODUCED PURSUANT TO SECTION 4-205.04, SUBSECTIONS D AND E. 23

G. THE DIRECTOR MAY ISSUE A FARM WINERY FAIR LICENSE WITH THE 24 PERMISSION OF STATE FAIR ORGANIZERS OR COUNTY FAIR ORGANIZERS, ANY FARM 25 WINERY MAY ALLOW THE SAMPLING OF FARM WINERY PRODUCTS ON THE FAIR 26 PREMISES, THE SALE OF THE PRODUCTS FOR CONSUMPTION ON THE FAIR PREMISES 27 AND THE SALE OF THE PRODUCTS IN ORIGINAL CONTAINERS FOR CONSUMPTION OFF OF 28 THE FAIR PREMISES AT ANY SANCTIONED STATE FAIR OR COUNTY FAIR. THE 29 DIRECTOR MAY ESTABLISH A PER-DAY FEE FOR EACH EVENT FOR A FARM WINERY FAIR 30 LICENSE. 31

D. H. Section 4-201 does not apply to the licenses provided for 32 under this section. 33

Sec. 9. Section 4-205, Arizona Revised Statutes, is amended to 34 read: 35

4-205. Issuance of club license; regulatory provisions; 36 revocation 37

A. The director may issue one club license to any club as defined 38 in section 4-101. 39

B. The holder of a club license is authorized to sell and serve 40 alcoholic beverages for consumption only within the licensed establishment 41 owned, leased or occupied by the club, and only to bona fide members of 42 the club, and to serve and sell to members' bona fide guests. Attendance 43 at private clubs is limited to enrolled members of the club and their 44 spouses, families and bona fide guests. Admitted nonmember guests shall 45

HB 2334

- 22 -

not exceed more than fifty percent of attendance during any month. This 1 provision shall not limit the ability of a member or the club to host 2 wedding receptions, group meetings, civic ASSOCIATION meetings, scheduled 3 social functions, including bingo games, and other member or club hosted 4 functions where individuals are not admitted on the basis of being a guest 5 of a member of the club and attendance at the event shall not be 6 considered in computing the fifty percent requirement. MEMBER RECRUITMENT 7 events that are hosted by the club or other members where individuals are 8 not admitted on the basis of being a guest of a member of the club OR NOT 9 IN ATTENDANCE AT OTHER SPECIFIED EVENTS AUTHORIZED IN THIS SECTION shall 10 be limited to not more than twelve events in a calendar year for each 11 club. 12

C. No member and no officer, agent or employee of a club licensee 13 shall be paid or shall directly or indirectly receive, in the form of 14 salary or other compensation, any of the profits from the revenue 15 producing activities of the club or from the distribution or sale of 16 alcoholic beverages to the members of the club or to its guests, beyond 17 the amount of the salary as fixed and voted on at a regular meeting by the 18 members of the club licensee or by its governing body out of the general 19 revenue of the licensee, nor shall such salaries or compensation be in 20 excess of reasonable compensation for the services actually performed. 21

D. The director may revoke a club license issued pursuant to this 22 section in any case in which IF the licensee ceases to operate as a bona 23 fide club as defined in section 4-101. 24

E. No A club may NOT hold a spirituous liquor license other than 25 one issued pursuant to this section, except that any club that on January 26 1, 1975 holds a spirituous liquor license other than one issued pursuant 27 to this section may use such THE license until such time as the license is 28 revoked or reverted. 29

Sec. 10. Section 4-205.04, Arizona Revised Statutes, is amended to 30 read: 31

4-205.04. Farm winery license; issuance; regulatory 32 provisions; retail site; fee 33

A. The director may issue a farm winery license to any person who 34 meets the requirements of subsection C of this section. Each location 35 that engages in producing or manufacturing these products must obtain a 36 separate farm winery license. The licensee may not transfer the farm 37 winery license from person to person or from location to location. 38

B. An applicant for a farm winery license, at the time of filing 39 the application for the license, shall accompany the application with the 40 license fee. Persons holding a farm winery license shall report annually 41 at the end of each calendar year, at such THE time and in such THE manner 42 as the director may prescribe PRESCRIBES, the amount of wine produced or 43 manufactured by them during the calendar year. In addition to any 44 provision of this title, if the total amount of wine produced or 45

HB 2334

- 23 -

manufactured during the year exceeds the amount permitted annually by the 1 license, the licensee shall apply for and receive a producer's license 2 only on surrender of the farm winery license or licenses. 3

C. A person may be licensed as a farm winery to sell wine produced 4 or manufactured if in a calendar year it produces at least two hundred 5 gallons and not more than forty thousand gallons of wine and if the winery 6 either holds a winery permit issued by the United States alcohol and 7 tobacco tax and trade bureau or has a contract pursuant to subsection E of 8 this section for the production or manufacturing of wine from grapes or 9 other fruit grown on at least five producing acres of land owned or 10 controlled by the applicant and the land has been devoted to fruit growing 11 for at least three consecutive calendar years. A licensed farm winery may 12 make sales and deliveries of wine only as specifically provided in this 13 section and as follows: 14

1. A licensed farm winery may make sales and deliveries of wine to 15 wholesalers licensed to sell wine under this title. 16

2. A licensed farm winery may serve wine produced or manufactured 17 on the premises for the purpose of sampling the wine. The wine may 18 include wine produced pursuant to subsections D and E of this section. 19

3. A representative of the licensed farm winery may consume small 20 amounts of the products of the licensed farm winery on the premises for 21 the purpose of sampling the wine. The wine may include wine produced 22 pursuant to subsections D and E of this section. 23

4. A licensed farm winery may sell to a consumer physically present 24 on the premises wine produced or manufactured on the premises in the 25 original container for consumption on or off the premises. The wine may 26 include wine produced pursuant to subsections D and E of this section. 27

5. A licensed farm winery may purchase and sell wine produced, 28 PACKAGED AND LABELED by another licensed farm winery for SAMPLING AND 29 consumption on or off the premises only if the retail sale is to a 30 consumer physically present on the premises of the farm winery, except 31 that the sales of wine produced, PACKAGED AND LABELED by another winery 32 may not exceed twenty percent of the farm winery's sales by volume. The 33 percentage limitation shall not apply to wine produced pursuant to 34 subsections D and E of this section. 35

6. If the licensed farm winery is not otherwise engaged in the 36 business of a distiller, vintner, brewer, rectifier, blender or other 37 producer of spirituous liquor in any jurisdiction, the licensed farm 38 winery may hold licenses prescribed in section 4-209, subsection B, 39 paragraph 12 on the licensed farm winery premises or other retail 40 premises. Except as provided in paragraph 5 of this subsection, the 41 licensed farm winery shall purchase all other spirituous liquor for sale 42 at the on-sale retail premises from wholesalers that are licensed in this 43 state, except that a licensed farm winery may: 44

HB 2334

- 24 -

(a) Purchase wine from other farm wineries pursuant to paragraph 7 1 of this subsection. 2

(b) Make deliveries of the wine that the farm winery produces to 3 the farm winery's own commonly controlled retail licensed premises. 4

7. A licensed farm winery that produces not more than twenty 5 thousand gallons of wine in a calendar year may make sales and deliveries 6 of the wine that the licensed farm winery produces to on-sale and off-sale 7 retailers. 8

8. Notwithstanding section 4-244, paragraphs 3 and 7, an on-sale or 9 off-sale retailer may purchase and accept delivery of wine from a licensed 10 farm winery pursuant to paragraph 7 of this subsection. 11

9. A licensed farm winery that produces not more than twenty 12 thousand gallons of wine in a calendar year may make sales and deliveries 13 of wine that the licensed farm winery produces to consumers off of the 14 licensed premises and that is ordered by telephone, mail, fax or 15 catalogue, through the internet or by other means if all of the following 16 apply: 17

(a) The purchaser of the wine provided the licensed farm winery 18 with verification of the purchaser's legal age to purchase alcohol. 19

(b) The shipping container in which the wine is shipped is marked 20 to require the signature on delivery of an adult who is of legal age to 21 purchase alcohol and delivery confirmation. 22

(c) The wine is for personal use only and not for resale. 23 (d) The wine is delivered by the licensed farm winery or shipped by 24

the licensed farm winery by a common carrier to a residential or business 25 address other than a premises licensed pursuant to this title. 26

(e) The purchaser could have carried the wine lawfully into or 27 within this state. 28

(f) The delivery is made by a person who is at least twenty-one 29 years of age. 30

(g) The farm winery shall collect COLLECTS payment for the price of 31 the spirituous liquor no later than at the time of delivery. 32

10. A licensed farm winery may make sales and deliveries as 33 expressly permitted by sections 4-203.03, 4-203.04 and 4-244.04. 34

D. On application by one or more persons, the director may approve 35 applications for grouping two or more farm winery licenses at one location 36 under a plan of alternating proprietorships if a licensed winery has 37 received approval of the alternating proprietorship by the United States 38 alcohol and tobacco tax and trade bureau and the participating wineries 39 operate under the regulations and guidelines that are issued by the United 40 States alcohol and tobacco tax and trade bureau. Each participating 41 winery shall be IS responsible for filing all reports that relate to its 42 wine production or manufacturing with the United States alcohol and 43 tobacco tax and trade bureau and the department. 44

HB 2334

- 25 -

E. A person otherwise qualified to receive a farm winery license 1 may enter into a custom crush arrangement where a licensed winery produces 2 or manufactures wine from grapes or other fruit supplied by the person. 3 The winery receiving the fruit shall be licensed by the United States 4 alcohol and tobacco tax and trade bureau and the department and shall be 5 IS responsible for filing all reports that relate to its wine production 6 or manufacturing with the United States alcohol and tobacco tax and trade 7 bureau and the department. Each person supplying the grapes or other 8 fruit shall first apply for and receive a farm winery license and shall 9 report to the department all volumes of wine from its custom crush 10 arrangements, which shall not be allocated to the gallonage of the 11 receiving farm winery if the supplying farm winery has an active basic 12 permit issued by the United States alcohol and tobacco tax and trade 13 bureau. 14

F. On application by a farm winery licensee, the director may 15 authorize a farm winery licensee to operate up to two remote tasting and 16 retail premises if: 17

1. The wine sold at the premises is limited to wine produced or 18 manufactured by the licensed farm winery and wines produced or 19 manufactured by other licensed farm wineries, including wines produced or 20 manufactured pursuant to subsections D and E of this section. The farm 21 winery may sell wine to a consumer physically present on the premises for 22 consumption on or off the premises. Sales of wines not produced or 23 manufactured by the farm winery shall be ARE limited to no more than 24 twenty percent of the total sales by volume at that location. The 25 percentage limitation shall not apply to wine produced pursuant to 26 subsections D and E of this section. 27

2. The farm winery licensee: 28 (a) Remains responsible for the premises. 29 (b) Obtains approval for the premises from the local governing body 30

before submitting an application to the department. A copy of an order 31 from the local governing body recommending approval of the premises must 32 be filed with the department as part of the application. 33

(c) Does not sublease the premises. 34 (d) Has an agent who is a natural person who meets the 35

qualifications of licensure in this state. 36 (e) Meets the qualifications for a license pursuant to section 37

4-203, subsection A. 38 3. THE FARM WINERY LICENSEE THAT OPERATES PRIMARILY AS A REMOTE 39

TASTING ROOM PREMISES MAY EXCHANGE THE FARM WINERY LICENSE FOR A REMOTE 40 TASTING ROOM LICENSE WITHOUT AN ADDITIONAL FEE, NOT LATER THAN DECEMBER 41 31, 2018. THE NEW REMOTE TASTING ROOM LICENSE MUST BE CONNECTED TO A FARM 42 WINERY LICENSE, WITH COMMON OWNERSHIP, THAT COMPLIES WITH ALL REQUIREMENTS 43 FOR A FARM WINERY LICENSE PURSUANT TO SUBSECTIONS C AND F OF THIS SECTION. 44

HB 2334

- 26 -

G. A farm winery licensee may hold a craft distiller license issued 1 pursuant to section 4-205.10. The farm winery and craft distiller 2 licensee may only produce distilled spirits up to a gallonage of one 3 thousand gallons in a calendar year from fruit processed at the winery for 4 the primary purpose of making wine. The farm winery and craft distiller 5 licensee is subject to all other requirements of this section and section 6 4-205.10. The farm winery may provide sampling and sales of the distilled 7 spirits pursuant to section 4-205.10, subsection C, paragraphs 2 and 3 on 8 the same premises as the wine sampling and retail sales. 9

H. The farm winery is liable for any violation committed in 10 connection with any sale or delivery of the wine. The rules adopted by 11 the director pursuant to section 4-203, subsection J shall apply to the 12 delivery of wine under subsection C, paragraph 9 of this section. An act 13 or omission of any person who makes a sale or delivery of wine for a 14 licensee under subsection C, paragraph 9 of this section is deemed to be 15 an act or omission of the licensee for the purposes of section 4-210, 16 subsection A, paragraph 9. 17

I. A farm winery that sells or delivers wine pursuant to this 18 section shall: 19

1. Pay to the department of revenue all luxury taxes imposed 20 pursuant to title 42, chapter 3 and all transaction privilege or use taxes 21 imposed pursuant to title 42, chapter 5. 22

2. File all returns or reports required by law. 23 J. A delivery of wine by a farm winery to a purchaser in this state 24

is a transaction deemed to have occurred in this state. 25 K. The director shall adopt rules in order to administer this 26

section. 27 L. The director may charge an additional farm winery license fee 28

adopted pursuant to section 4-209 for the issuance of licenses, 29 authorizations or approvals pursuant to subsections D, E and F of this 30 section. 31

Sec. 11. Section 4-205.08, Arizona Revised Statutes, is amended to 32 read: 33

4-205.08. Microbrewery license; issuance; regulatory 34 provisions; retail site 35

A. The director may issue a microbrewery license to any 36 microbrewery. Each location that engages in producing, manufacturing and 37 bottling these products must obtain a separate microbrewery license. The 38 licensee may not transfer the microbrewery license from person to person 39 or from location to location. 40

B. An applicant for a microbrewery license, at the time of filing 41 the application for the license, shall accompany the application with the 42 license fee. Persons holding a microbrewery license shall report annually 43 at the end of each calendar year, at such THE time and in such THE manner 44 as the director may prescribe PRESCRIBES, the amount of beer produced or 45

HB 2334

- 27 -

manufactured by them during the calendar year and the amount delivered 1 pursuant to subsection D, paragraph 4, subdivision (b) of this section. 2 If the total amount of beer that is produced or manufactured during the 3 calendar year exceeds the amount permitted annually by the license, the 4 licensee shall apply for and receive a producer's license only on 5 surrender of the microbrewery license or licenses and shall have no 6 continuing rights as a microbrewery under this section. On the surrender 7 of the microbrewery license or licenses, the licensee shall transfer, 8 surrender or otherwise relinquish control of all of its retail licenses 9 located remotely from a microbrewery. 10

C. Notwithstanding any other law, a licensed microbrewery may: 11 1. Sell beer produced or manufactured on the premises for 12

consumption on or off the premises. 13 2. Make sales and deliveries of beer that the microbrewery produces 14

or manufactures to persons licensed to sell beer under this title through 15 wholesalers licensed under this title or as provided in subsection D, 16 paragraph 5 4, subdivision (a) or (b) of this section. 17

3. Make sales and deliveries of beer that the microbrewery produces 18 or manufactures to persons licensed to sell beer in another state if 19 lawful under the laws of that state. 20

4. Serve beer produced or manufactured on the premises for the 21 purpose of sampling the beer. 22

5. Sell beer produced or manufactured by other microbreweries for 23 consumption only on the premises of the licensee, except that the sales 24 percentage of beer from other microbreweries may not exceed twenty percent 25 of the licensee's annual sales of beer by volume at the premises. If the 26 other microbrewery has established a distribution relationship with one or 27 more wholesalers who are licensed under this title, the beer shall be 28 purchased through those wholesalers. 29

6. MAINTAIN AT NO CHARGE A TAPPING EQUIPMENT SYSTEM OF A LICENSED 30 RETAILER WHEN THE MICROBREWERY SELLS BEER AS PROVIDED IN SUBSECTION D, 31 PARAGRAPHS 3 AND 4 OF THIS SECTION, INCLUDING CLEANING THE TAPPING 32 EQUIPMENT SYSTEM AND REPLACING BONNET WASHERS, FRICTION RINGS, VALVE 33 STEMS, HARDWARE, UNIONS, CLAMPS, AIR TEES, SCREWS, TAPPING DEVICES, TOWER 34 HEADS AND SINGLE AIR AND BEER LINES. 35

D. A licensed microbrewery is subject to all of the following 36 requirements: 37

1. The microbrewery shall produce or manufacture not less than five 38 thousand gallons of beer in each calendar year following the first year of 39 operation. 40

2. The microbrewery shall not produce or manufacture more than six 41 million two hundred thousand gallons of beer in a calendar year. 42

3. If retail operations are conducted in conjunction with the 43 microbrewery, the microbrewery may sell other spirituous liquor products 44 if the microbrewery holds an on-sale retail license for a bar, beer and 45

HB 2334

- 28 -

wine bar, or restaurant. The microbrewery may be issued up to a combined 1 total of seven retail licenses in this state whether THE PREMISES ARE 2 located on or adjacent to a microbrewery or remotely from a 3 microbrewery. The limit on the number of retail licenses applies on an 4 aggregated basis to all microbreweries that are under common control of 5 any person with control of the microbrewery. 6

4. The microbrewery may make sales and deliveries of beer that it 7 has produced or manufactured to both: 8

(a) Retail licensees that meet the requirements prescribed in 9 paragraph 3 of this subsection in any amount. 10

(b) Any other retail licensee in a cumulative amount not to exceed 11 ninety-three thousand gallons in total for all licensed retailers in any 12 calendar year. 13

E. A microbrewery that produces or manufactures more than one 14 million two hundred forty thousand gallons of beer in a calendar year 15 maintains all of the rights associated with a microbrewery license, with 16 the exception EXCEPT that it THE MICROBREWERY shall not: 17

1. Apply for or receive a retail license pursuant to subsection D, 18 paragraph 3 of this section FOR PREMISES that is ARE located remotely from 19 the microbrewery. 20

2. Make sales or deliveries of beer that it THE MICROBREWERY has 21 produced or manufactured to any retail license LICENSEE as provided in 22 subsection D, paragraph 4 of this section, except for its THE 23 MICROBREWERY'S retail licenses LICENSEES on or adjacent to the 24 microbrewery. 25

F. The gallonage amounts prescribed in subsection D, paragraph 2 26 and subsection E of this section apply to the aggregate manufacture or 27 production of all microbreweries that are under common control of any 28 person with control of the microbrewery. 29

G. A microbrewery that is otherwise engaged as a distiller, 30 vintner, brewer, rectifier, blender or other producer of spirituous liquor 31 in any jurisdiction is prohibited from holding any retail license that is 32 located remotely from a microbrewery. 33

H. A microbrewery that sells or delivers beer pursuant to this 34 section shall: 35

1. Pay to the department of revenue all luxury taxes imposed 36 pursuant to title 42, chapter 3 and all transaction privilege or use taxes 37 imposed pursuant to title 42, chapter 5. 38

2. File all returns or reports required by law. 39 I. A delivery of beer by a microbrewery to a purchaser in this 40

state is a transaction deemed to have occurred in this state. 41 J. The director shall adopt rules in order to administer this 42

section. 43

HB 2334

- 29 -

Sec. 12. Section 4-205.10, Arizona Revised Statutes, is amended to 1 read: 2

4-205.10. Craft distiller license; issuance; regulatory 3 provisions; fee 4

A. The director may issue a craft distiller license to any person 5 that meets the requirements of subsection C of this section. Each 6 location that engages in producing and bottling these products must obtain 7 a separate craft distiller license. The licensee may not transfer the 8 craft distiller license from person to person or from location to location 9 and may not also hold a producer's license. The licensee and all commonly 10 controlled craft distiller licensees may not manufacture or produce more 11 than twenty thousand gallons of distilled spirits in a calendar year. For 12 the purposes of this section, annual gallonage shall be the total proof 13 gallons of finished distilled product available for wholesale or retail 14 sale as defined by 26 United States Code section 5002 and rules adopted 15 pursuant to this section or its successor. 16

B. Persons holding a craft distiller license shall report annually 17 at the end of each calendar year, at such THE time and in such THE manner 18 as the director may prescribe PRESCRIBES, the amount of distilled spirits 19 that is produced or manufactured by that licensee during the calendar 20 year. In addition to any other provision of this title, if the total 21 amount of distilled spirits that is produced or manufactured during the 22 year exceeds the amount that is permitted annually by the license, the 23 licensee shall apply for and, on qualification, receive a producer's 24 license only on the surrender of the craft distiller license and shall 25 have no continuing rights as a craft distiller licensee under this 26 section. 27

C. A person may be licensed as a craft distiller to sell distilled 28 spirits that are produced or manufactured by the person if in a calendar 29 year the person produces or manufactures not more than twenty thousand 30 gallons of distilled spirits and may make sales and deliveries of 31 distilled spirits only as specified in this section and subject to the 32 following criteria: 33

1. A licensed craft distiller may make sales and deliveries of 34 distilled spirits to wholesalers that are licensed to sell distilled 35 spirits under this title. 36

2. A licensed craft distiller may serve distilled spirits that are 37 produced or manufactured on the premises for the purpose of consumption on 38 the premises and may charge for samples on the premises of the craft 39 distiller. 40

3. A licensed craft distiller may sell distilled spirits that are 41 produced or manufactured on the premises in the original container for 42 consumption off the premises to a consumer who is physically present on 43 the premises. 44

HB 2334

- 30 -

4. The licensed craft distiller may hold one license prescribed in 1 section 4-209, subsection B, paragraph 6 or 12 on or adjacent to the 2 licensed craft distiller premises. The licensed craft distiller shall 3 purchase all other spirituous liquor for sale at the on-sale retail 4 premises from wholesalers that are licensed in this state, except that a 5 licensed craft distiller may: 6

(a) Purchase distilled spirits from other craft distillers that are 7 licensed in this state. Sales of craft distillery products not produced 8 or manufactured by the craft distiller shall be limited to no more than 9 twenty percent of the total sales by volume. 10

(b) Make deliveries of the distilled spirits that the craft 11 distiller manufactures or produces to any commonly controlled retail 12 licensed premises that are located on or adjacent to the craft distiller 13 premises or to the craft distiller's remote tasting rooms and that are 14 authorized pursuant to this paragraph. 15

5. A licensed craft distiller that produces not more than one 16 thousand one hundred eighty-nine gallons of distilled spirits in a 17 calendar year may make sales and deliveries of distilled spirits that the 18 licensed craft distiller produces to on-sale and off-sale retailers. 19

6. Notwithstanding section 4-244, paragraphs 3 and 7, an on-sale or 20 off-sale retailer may purchase and accept delivery of distilled spirits 21 from a licensed craft distiller pursuant to paragraph 5 of this 22 subsection. 23

7. A licensed craft distiller may make sales and deliveries of 24 distilled spirits that the licensed craft distiller manufactures or 25 produces to consumers off of the licensed premises if the sale or delivery 26 is ordered by telephone, mail, fax, catalogue, the internet or by other 27 means if all of the following conditions exist: 28

(a) The purchaser of the distilled spirits provided the licensed 29 craft distiller with verification of the purchaser's legal age to purchase 30 alcohol and a copy of same is maintained in the records of the craft 31 distiller. 32

(b) The shipping container in which the distilled spirits are 33 shipped is marked to require the signature on delivery of an adult who is 34 of legal age to purchase alcohol and delivery confirmation. 35

(c) The distilled spirits are for personal use only and not for 36 resale. 37

(d) The distilled spirits are shipped to a residential or business 38 address other than a premises licensed pursuant to this title. 39

(e) The purchaser could have carried the distilled spirits lawfully 40 into or within this state. 41

(f) A person who is at least twenty-one years of age makes the 42 delivery. 43

(g) The craft distiller collects payment for the price of the 44 spirituous liquor no later than at the time of delivery. 45

HB 2334

- 31 -

D. On application by a craft distiller licensee, the director may 1 authorize a craft distiller licensee to operate two other remote tasting 2 and retail premises if: 3

1. The distilled spirits sold at the premises are limited to 4 distilled spirits produced or manufactured by the licensed craft 5 distillery and distilled spirits produced or manufactured by another 6 licensed craft distillery. The craft distillery may sell to a consumer 7 physically present on the premises distilled spirits produced by the craft 8 distillery or by other licensed craft distilleries in the original 9 container for consumption on or off the premises. The sales of the 10 distilled spirits produced or manufactured by other craft distilleries 11 shall not exceed twenty percent of the craft distillery's total sales by 12 volume. 13

2. The craft distiller licensee: 14 (a) Remains responsible for the premises. 15 (b) Obtains approval for the premises from the local governing body 16

before submitting an application to the department. A copy of an order 17 from the local governing body recommending approval of the premises must 18 be filed with the department as part of the application. 19

(c) Does not sublease the premises. 20 (d) Has an agent who shall be IS a natural person who meets the 21

qualifications of licensure in this state. 22 (e) Meets the qualifications for a license pursuant to section 23

4-203, subsection A. 24 (f) For a tasting room with a shared patio, meets the requirements 25

prescribed in section 4-205.12. 26 E. The craft distiller is liable for any violation that is 27

committed in connection with any sale or delivery of the distilled 28 spirits. The rules adopted by the director pursuant to section 4-203, 29 subsection J apply to the delivery of distilled spirits under subsection C 30 of this section. An act or omission of any person who makes a sale or 31 delivery of distilled spirits for a licensee under subsection C of this 32 section is deemed to be an act or omission of the licensee for the 33 purposes of section 4-210, subsection A, paragraph 9. 34

F. A craft distiller that sells or delivers distilled spirits 35 pursuant to this section shall: 36

1. Pay to the department of revenue all luxury taxes that are 37 imposed pursuant to title 42, chapter 3 and all transaction privilege or 38 use taxes that are imposed pursuant to title 42, chapter 5. 39

2. File all returns or reports that are required by law. 40 G. A delivery of distilled spirits by a craft distiller to a 41

purchaser in this state is a transaction deemed to have occurred in this 42 state. 43

H. The director may adopt rules in order to administer this 44 section. 45

HB 2334

- 32 -

I. The director may charge a fee adopted pursuant to section 4-209 1 for the issuance of a license pursuant to this section. 2

J. The director may issue a craft distiller license to be located 3 on the same parcel of land as a farm winery licensed pursuant to section 4 4-205.04. 5

Sec. 13. Section 4-205.11, Arizona Revised Statutes, is amended to 6 read: 7

4-205.11. Craft distillery festival license; craft distillery 8 fair license; craft distillery fee 9

A. The director may issue on a temporary basis a craft distillery 10 festival license that authorizes: 11

1. The sampling of the craft distillery products on the craft 12 distillery festival premises. 13

2. The sale of products for consumption on the craft distillery 14 festival premises. 15

3. The sale of products in the original container for consumption 16 off the craft distillery festival premises. 17

B. Before the director may issue a craft distillery festival 18 license, a craft distillery festival that is to occur at an otherwise 19 unlicensed location or at a location that is not fully within the 20 licensee's existing licensed premises must be approved by the board of 21 supervisors of the county, OR THE BOARD'S DESIGNEE, if the event is to be 22 held in an unincorporated area or by the governing body of the city or 23 town, OR THE GOVERNING BODY'S DESIGNEE, if the event is to be held in a 24 city or town. A DENIAL BY THE COUNTY, CITY OR TOWN MUST BE FORWARDED TO 25 THE DIRECTOR WITHIN NINETY DAYS AFTER THE SUBMISSION OF AN APPLICATION TO 26 THE COUNTY, CITY OR TOWN. FAILURE TO FORWARD A DENIAL TO THE DIRECTOR 27 WITHIN NINETY DAYS AFTER THE SUBMISSION OF AN APPLICATION IS DEEMED AS NO 28 RECOMMENDATION BY THE COUNTY, CITY OR TOWN. 29

C. The approval process prescribed in this section does not apply 30 to physical locations that are fully located within a premises that is 31 licensed pursuant to this title. 32

D. The director may issue one or more craft distillery festival 33 licenses for each craft distillery licensed pursuant to this title, for a 34 total of up to one hundred fifty calendar days per craft distillery. The 35 director may establish a fee for each day of each event for a craft 36 distillery festival license. 37

E. Any craft distillery may apply for a craft distillery festival 38 license pursuant to this section. 39

F. With the permission of the state or county fair organizers, any 40 craft distillery is authorized to allow sampling of craft distillery 41 products on the fair premises, the sale of the products for consumption on 42 the fair premises and the sale of the products in original containers for 43 consumption off of the fair premises at any sanctioned county or state 44

HB 2334

- 33 -

fair. The director may establish a per day PER-DAY fee for each event for 1 a craft distillery fair license. 2

G. Section 4-201 does not apply to the licenses provided for under 3 this section. 4

Sec. 14. Section 4-206.01, Arizona Revised Statutes, is amended to 5 read: 6

4-206.01. Bar, beer and wine bar or liquor store licenses; 7 number permitted; fee; sampling privileges 8

A. The director shall determine the total number of spirituous 9 liquor licenses by type and in each county. The director shall publish a 10 listing of that information as determined by the director. 11

B. In each county, the director, each year, shall issue additional 12 bar or liquor store licenses at the rate of one of each type for each 13 additional ten thousand person increase over the population in that county 14 as of July 1, 2010. Any licenses that have FOR EVERY LICENSE THAT HAS 15 been revoked or reverted in any county, THE DIRECTOR may be reissued by 16 the director ISSUE A NEW LICENSE OF THE SAME SERIES in the SAME county of 17 their issuance. The director may waive the issuance of any series of new, 18 revoked or reverted licenses in a county for one year where there has been 19 no request made to the department for the issuance of a new license of 20 that series. For the purposes of this subsection, the population of a 21 county is deemed to be the population estimated by the office of economic 22 opportunity as of July 1 of each year. 23

C. In each county, the director, each year, shall issue additional 24 beer and wine bar licenses at the rate of one TWO for each additional five 25 thousand person increase over the population in that county until January 26 1, 2022 AS OF JULY 1, 2010. Beginning January 1, 2022, in each county, 27 the director, each year, shall issue additional beer and wine bar licenses 28 at the rate of one for each additional ten thousand person increase over 29 the population in that county AS OF JULY 1, 2010. Any licenses that have 30 FOR EVERY LICENSE THAT HAS been revoked or reverted in any county, THE 31 DIRECTOR may be reissued by the director ISSUE A NEW LICENSE OF THE SAME 32 SERIES in the SAME county where the licenses were originally issued. The 33 director may waive the issuance of any series of new, revoked or reverted 34 licenses in a county for one year if there has been no request made to the 35 department for the issuance of a new license of that series. For the 36 purposes of this subsection, the population of a county is deemed to be 37 the population estimated as of July 1 of each year by the office of 38 economic opportunity. 39

D. A person issued a license authorized by subsection B OR C of 40 this section shall pay an additional issuance fee equal to the license's 41 fair market value that shall be paid to the state general fund. AN 42 APPRAISAL SHALL BE CONDUCTED TO DETERMINE THE FAIR MARKET VALUE OF THAT 43 LICENSE TYPE IN A SPECIFIC COUNTY. The fair market value shall be defined 44 to mean the mean PRICE ARRIVED AT IN GOOD FAITH THAT A KNOWLEDGEABLE AND 45

HB 2334

- 34 -

WILLING BUYER WILL PAY AND SHALL BE COMPUTED BY DETERMINING THE AVERAGE 1 value, OR WEIGHTED AVERAGE VALUE IF THERE ARE TRENDS IN LICENSE PRICING IN 2 THAT COUNTY, of licenses of the same type, FREE OF ANY ENCUMBRANCES, sold 3 on the open market in the same county during the prior twelve months, but 4 if there are not three or more sales then the fair market value shall be 5 determined by two appraisals furnished to the department by independent 6 professional appraisers employed by the director. THE VALUATION METHOD 7 UNDER BOTH APPROACHES SHALL TAKE INTO ACCOUNT TRENDS IN THE VALUE OF 8 LICENSES OF THE SPECIFIC TYPE DURING THE PREVIOUS TWELVE MONTHS. 9

E. The director shall employ professional appraisal services to 10 determine the fair market value of bar, beer and wine bar or liquor store 11 licenses. 12

F. If more than one person applies for an available license, a 13 priority of applicants shall be determined by a random selection method 14 prescribed by the director, except that the number of times that a person 15 may enter the random selection process shall not exceed the number of 16 licenses of that series that are available for issuance. For the purposes 17 of this section SUBSECTION, a partnership, limited liability company, 18 association, company or corporation shall be IS considered the same person 19 if IT IS owned, managed, operated or controlled by the same controlling 20 person, as defined in section 4-101. 21

G. After January 1, 2011, Bar licenses and beer and wine bar 22 licenses shall be issued and used only if the clear primary purpose and 23 actual primary use is for on-sale retailer privileges. The off-sale 24 privileges associated with a bar license and a beer and wine bar license 25 shall be limited to use, which is clearly auxiliary to the active primary 26 on-sale privilege. A bar license or a beer and wine bar license shall not 27 be issued or used if the associated off-sale use, by total retail 28 spirituous liquor sales, exceeds thirty percent of the sales price of 29 on-sale spirituous liquors by the licensee at that location. For dual 30 licenses issued pursuant to a single site or where a second license is 31 issued to a site that already has a spirituous liquor license, other than 32 settlement licenses issued as provided by law, the applicant shall have 33 HAS the burden of establishing that public convenience and the best 34 interest of the community will be served by the issuance of the license. 35

H. The director may issue a beer and wine store license to the 36 holder of a beer and wine bar license simultaneously at the same 37 premises. An applicant for a beer and wine bar license and a beer and 38 wine store license may consolidate the application and may apply for both 39 licenses at the same time. The holder of each license shall fully comply 40 with all applicable provisions of this title. A beer and wine bar license 41 and beer and wine store license on the same premises shall be owned by and 42 issued to the same licensee. 43

I. The director may issue a beer and wine bar license to the holder 44 of a liquor store license issued simultaneously at the same premises. An 45

HB 2334

- 35 -

applicant for a liquor store license and a beer and wine bar license may 1 consolidate the application and may apply for both licenses at the same 2 time. The holder of each license shall fully comply with all applicable 3 provisions of this title. A liquor store license and a beer and wine bar 4 license on the same premises shall be owned by and issued to the same 5 licensee. 6

J. The director may issue a restaurant license to the holder of a 7 beer and wine bar license issued simultaneously at the same premises. An 8 applicant for a restaurant license and a beer and wine bar license may 9 consolidate the application and may apply for both licenses at the same 10 time. The holder of each license shall fully comply with all applicable 11 provisions of this title. A restaurant license and a beer and wine bar 12 license on the same premises shall be owned by and issued to the same 13 licensee. The limitation set forth STATED in subsection G of this section 14 with respect to the off-sale privileges of the beer and wine bar licenses 15 shall be measured against the on-sales of beer and wine sales of the 16 establishment. For the purposes of compliance with section 4-205.02, 17 subsection I, paragraph 2, it shall be conclusively presumed that all on 18 premises ON-PREMISES sales of spirituous liquors are made under the 19 authority of the restaurant license. 20

K. An applicant for a liquor store license or a beer and wine store 21 license and the licensee of a liquor store license or a beer and wine 22 store license may apply for sampling privileges associated with the 23 license. Beer and wine store premises containing less than five thousand 24 square feet must dedicate at least seventy-five percent of retail shelf 25 space to the sale of spirituous liquor in order to be eligible for 26 sampling privileges. A person desiring a sampling privilege associated 27 with a liquor store license shall apply to the director on a form 28 prescribed and furnished by the director. The application for sampling 29 privileges may be filed for an existing license or may be submitted with 30 an initial license application. The request for sampling approval, the 31 review of the application and the issuance of approval shall be conducted 32 under the same procedures for the issuance of a spirituous liquor license 33 prescribed in section 4-201. After a sampling privilege has been issued 34 for a liquor store license or a beer and wine store license, the sampling 35 privilege shall be noted on the license itself and in the records of the 36 department. The sampling rights associated with a license are not 37 transferable. The director may charge a fee for processing each 38 application for sampling privileges and a renewal fee as provided in this 39 section. A city or town shall not charge any fee relating to the issuance 40 or renewal of a sampling privilege. Notwithstanding section 4-244, 41 paragraph 19, a liquor store licensee or a beer and wine store licensee 42 that holds a license with sampling privileges may provide spirituous 43 liquor sampling subject to the following requirements: 44

HB 2334

- 36 -

1. Any open product shall be kept locked by the licensee when the 1 sampling area is not staffed. 2

2. The licensee is otherwise subject to all other provisions of 3 this title. The licensee is liable for any violation of this title 4 committed in connection with the sampling. 5

3. The licensed retailer shall make sales of sampled products from 6 the licensed retail premises. 7

4. The licensee shall not charge any customer for the sampling of 8 any products. 9

5. The sampling shall be conducted under the supervision of an 10 employee of a sponsoring distiller, vintner, brewer, wholesaler or retail 11 licensee. 12

6. Accurate records of sampling products dispensed shall be 13 retained by the licensee. 14

7. Sampling shall be limited to three ounces of beer or cooler-type 15 products, one and one-half ounces of wine and one ounce of distilled 16 spirits per person, per brand, per day. 17

8. The sampling shall be conducted only on the licensed premises. 18 L. If a beer and wine bar license and a beer and wine store license 19

are issued at the same premises, for the purposes of reporting liquor 20 purchases under each license, all spirituous beverages purchased for 21 sampling are conclusively presumed to be purchased under the beer and wine 22 bar license and all spirituous liquor sold off-sale are conclusively 23 presumed to be purchased under the beer and wine store license. 24

M. The director may issue a beer and wine store license to the 25 holder of a bar license simultaneously at the same premises. An applicant 26 for a beer and wine store license and a bar license may consolidate the 27 application and may apply for both licenses at the same time. The holder 28 of each license shall fully comply with all applicable provisions of this 29 title. A beer and wine store license and a bar license on the same 30 premises shall be owned by and issued to the same licensee. If a beer and 31 wine store license and a bar license are issued at the same premises, for 32 purposes of reporting liquor purchases under each license, all off-sale 33 beer and wine sales are conclusively presumed to be purchased under the 34 beer and wine store license. 35

Sec. 15. Section 4-207, Arizona Revised Statutes, is amended to 36 read: 37

4-207. Restrictions on licensing premises near school or 38 church buildings; definitions 39

A. A retailer's license shall not be issued for any premises that 40 are, at the time the license application is received by the director, 41 within three hundred horizontal feet of a church, within three hundred 42 horizontal feet of a public or private school building with kindergarten 43 programs or any of grades one through twelve or within three hundred 44 horizontal feet of a fenced recreational area adjacent to such school 45

HB 2334

- 37 -

building. This section does not prohibit the renewal of a valid license 1 issued pursuant to this title if, on the date that the original 2 application for the license is filed, the premises were not within three 3 hundred horizontal feet of a church, within three hundred horizontal feet 4 of a public or private school building with kindergarten programs or any 5 of grades one through twelve or within three hundred horizontal feet of a 6 fenced recreational area adjacent to such school building. 7

B. Subsection A of this section does not apply to a: 8 1. Restaurant issued a license pursuant to section 4-205.02, 9

subject to the limitations in section 4-205.02, subsection H, for a permit 10 allowing for the sale of beer for consumption off of the licensed premises 11 pursuant to section 4-244, paragraph 32, subdivision (c). 12

2. Special event license issued pursuant to section 4-203.02. 13 3. Hotel-motel issued a license pursuant to section 4-205.01. 14 4. Government license issued pursuant to section 4-205.03. 15 5. Playing area of a golf course issued a license pursuant to this 16

article. 17 6. Beer and wine license at a not-for-profit performing arts 18

theatre with a permanent seating capacity of at least two hundred fifty 19 persons. 20

7. CRAFT DISTILLERY FESTIVAL LICENSE ISSUED PURSUANT TO SECTION 21 4-205.11. 22

8. FARM WINERY FESTIVAL LICENSE ISSUED PURSUANT TO SECTION 23 4-203.03. 24

C. Notwithstanding subsection A of this section: 25 1. A transferable spirituous liquor license that is validly issued 26

and that is, on the date an application for a transfer is filed, within 27 three hundred horizontal feet of a church, within three hundred horizontal 28 feet of a public or private school building with kindergarten programs or 29 any of grades one through twelve or within three hundred horizontal feet 30 of a fenced recreational area adjacent to such school building may be 31 transferred person to person pursuant to sections 4-201, 4-202 and 4-203 32 and remains in full force until the license is terminated in any manner, 33 unless renewed pursuant to section 4-209, subsection A. 34

2. A person may be issued a spirituous liquor license pursuant to 35 sections 4-201, 4-202 and 4-203 of the same class for premises that, on 36 the date the application is filed, have a valid transferable or 37 nontransferable license of the same series if the premises are, on the 38 date an application for such THE license is filed, within three hundred 39 horizontal feet of a church, within three hundred horizontal feet of a 40 public or private school building with kindergarten programs or any of 41 grades one through twelve or within three hundred horizontal feet of a 42 fenced recreational area adjacent to such school building and the license 43 remains in full force until the license is terminated in any manner, 44 unless renewed pursuant to section 4-209, subsection A. 45

HB 2334

- 38 -

3. A person may be issued a liquor store license pursuant to 1 sections 4-201, 4-202, 4-203 and 4-206.01 for premises that have a beer 2 and wine store license validly issued if the premises, on the date an 3 application for such license is filed, are within three hundred horizontal 4 feet of a church, within three hundred horizontal feet of a public or 5 private school building with kindergarten programs or any of grades one 6 through twelve or within three hundred horizontal feet of a fenced 7 recreational area adjacent to such school building and the license remains 8 in full force until the license is terminated in any manner, unless 9 renewed pursuant to section 4-209, subsection A. 10

4. The governing body of a city or town, on a case-by-case basis, 11 may approve an exemption from the distance restrictions prescribed in this 12 section for a church or a public or private school that is located in an 13 area that is designated an entertainment district by the governing body of 14 that city or town. A city or town with a population of at least five 15 hundred thousand persons may designate no more than three entertainment 16 districts within the boundaries of the city or town pursuant to this 17 paragraph. A city or town with a population of at least two hundred 18 thousand persons but less than five hundred thousand persons may designate 19 no more than two entertainment districts within the boundaries of the city 20 or town pursuant to this paragraph. A city or town with a population of 21 less than two hundred thousand persons may designate no more than one 22 entertainment district within the boundaries of the city or town pursuant 23 to this paragraph. 24

5. A person may be issued a beer and wine store license pursuant to 25 sections 4-201, 4-202, 4-203 and 4-206.01 for premises that have a liquor 26 store license validly issued if the premises, on the date of an 27 application for which the license is filed, are within three hundred 28 horizontal feet of a church, within three hundred horizontal feet of a 29 public or private school building with kindergarten programs or any of 30 grades one through twelve or within three hundred horizontal feet of a 31 fenced recreation area adjacent to such school building and the license 32 remains in full force until the license is terminated in any manner, 33 unless renewed pursuant to section 4-209, subsection A. 34

D. For the purposes of this section: 35 1. "Church" means a building which THAT is erected or converted for 36

use as a church, where services are regularly convened, that is used 37 primarily for religious worship and schooling and that a reasonable person 38 would conclude is a church by reason of design, signs or architectural or 39 other features. 40

2. "Entertainment district" means a specific contiguous area that 41 is designated an entertainment district by a resolution adopted by the 42 governing body of a city or town, that consists of no more than one square 43 mile, that is no less than one-eighth of a mile in width and that contains 44 a significant number of entertainment, artistic and cultural venues, 45

HB 2334

- 39 -

including music halls, concert facilities, theaters, arenas, stadiums, 1 museums, studios, galleries, restaurants, bars and other related 2 facilities. 3

Sec. 16. Section 4-210, Arizona Revised Statutes, is amended to 4 read: 5

4-210. Grounds for revocation, suspension and refusal to 6 renew; notice; complaints; hearings; defense 7

A. After notice and hearing, the director may suspend, revoke or 8 refuse to renew any license issued pursuant to this chapter for any of the 9 following reasons: 10

1. There occurs on the licensed premises repeated acts of violence 11 or disorderly conduct. 12

2. The licensee fails to satisfactorily maintain the capability, 13 qualifications and reliability requirements of an applicant for a license 14 prescribed in section 4-202 or 4-203. 15

3. The licensee or controlling person knowingly files with the 16 department an application or other document that contains material 17 information that is false or misleading or while under oath knowingly 18 gives testimony in an investigation or other proceeding under this title 19 that is false or misleading. 20

4. The licensee or controlling person is on the premises habitually 21 intoxicated. 22

5. The licensed business is delinquent for more than one hundred 23 twenty days in the payment of taxes, penalties or interest in an amount 24 that exceeds two hundred fifty dollars to the state or to any political 25 subdivision of the state. 26

6. The licensee or controlling person obtains, assigns, transfers 27 or sells a spirituous liquor license without compliance with this title or 28 leases or subleases a license. 29

7. The licensee fails to keep for two years and make available to 30 the department on reasonable request all invoices, records, bills or other 31 papers and documents relating to the purchase, sale and delivery of 32 spirituous liquors and, in the case of a restaurant or hotel-motel 33 licensee, all invoices, records, bills or other papers and documents 34 relating to the purchase, sale and delivery of food. 35

8. The licensee or controlling person is convicted of a felony 36 provided that for a conviction of a corporation to serve as a reason for 37 any action by the director, conduct that constitutes the corporate offense 38 and was the basis for the felony conviction must have been engaged in, 39 authorized, solicited, commanded or recklessly tolerated by the directors 40 of the corporation or by a high managerial agent acting within the scope 41 of employment. 42

9. The licensee or controlling person violates or fails to comply 43 with this title, any rule adopted pursuant to this title or any liquor law 44 of this state or any other state. 45

HB 2334

- 40 -

10. The licensee fails to take reasonable steps to protect the 1 safety of a customer of the licensee or any other person entering, leaving 2 or remaining on the licensed premises when the licensee knew or reasonably 3 should have known of the danger to the person, or the licensee fails to 4 take reasonable steps to intervene by notifying law enforcement officials 5 or otherwise to prevent or break up an act of violence or an altercation 6 occurring on the licensed premises or immediately adjacent to the premises 7 when the licensee knew or reasonably should have known of the acts of 8 violence or altercations. 9

11. The licensee or controlling person lacks good moral character. 10 12. The licensee or controlling person knowingly associates with a 11

person who has engaged in racketeering, as defined in section 13-2301, or 12 who has been convicted of a felony, and the association is of a nature as 13 to create a reasonable risk that the licensee will fail to conform to the 14 requirements of this title or of any criminal statute of this state. 15

13. A licensee that is a liquor store as defined in section 46-297 16 violates the restrictions on use of automatic teller machines or 17 point-of-sale terminals regarding electronic benefit transfer cards 18 prescribed in section 4-242.01. 19

14. There occurs on the licensed premises a serious act of violence. 20 For the purposes of this paragraph, "serious act of violence" means an 21 incident consisting of a riot, a brawl or a disturbance ACT OF VIOLENCE in 22 which a serious injury causes the death or critical injury of a person and 23 such THE injuries would be obvious to a reasonable person. 24

15. The licensee fails to report a serious act of violence that 25 occurs on the licensed premises. For the purposes of this paragraph, 26 "serious act of violence" means an incident consisting of a riot, a brawl 27 or a disturbance in which a serious injury causes death or critical injury 28 of a person and such THE injuries would be obvious to a reasonable person. 29

16. THE LICENSEE VIOLATES AN ORDER OF THE BOARD. 30 B. For the purposes of: 31 1. Subsection A, paragraph 8 of this section, "high managerial 32

agent" means an officer of a corporation or any other agent of the 33 corporation in a position of comparable authority with respect to the 34 formulation of corporate policy. 35

2. Subsection A, paragraphs 9 and 10 of this section, acts or 36 omissions of an employee of a licensee that violate any provision of this 37 title or rules adopted pursuant to this title shall be ARE deemed to be 38 acts or omissions of the licensee. Acts or omissions by an employee or 39 licensee committed during the time the licensed premises were operated 40 pursuant to an interim permit or without a license may be charged as if 41 they had been committed during the period the premises were duly licensed. 42

C. The director may suspend, revoke or refuse to issue, transfer or 43 renew a license under this section based solely on the unrelated conduct 44 or fitness of any officer, director, managing agent or other controlling 45

HB 2334

- 41 -

person if the controlling person retains any interest in or control of the 1 licensee after sixty days following written notice to the licensee. If 2 the controlling person holds stock in a corporate licensee or is a partner 3 in a partnership licensee, the controlling person may only divest himself 4 of his interest by transferring the interest to the existing stockholders 5 or partners who must demonstrate to the department that they meet all the 6 requirements for licensure. For the purposes of this subsection, the 7 conduct or fitness of a controlling person is unrelated if it would not be 8 attributable to the licensee. 9

D. If the director finds, based on clear and convincing evidence in 10 the record, that a violation involves the use by the licensee of a 11 drive-through or walk-up service window or other physical feature of the 12 licensed premises that allows a customer to purchase spirituous liquor 13 without leaving the customer's vehicle or, with respect to a walk-up 14 service window that prevents the licensee from fully observing the 15 customer, and that the use of that drive-through or walk-up service window 16 or other physical feature caused the violation, the director may suspend 17 or terminate the licensee's use of the drive-through or walk-up service 18 window or other physical feature for the sale of spirituous liquor, in 19 addition to any other sanction. 20

E. The director may refuse to transfer any license or issue a new 21 license at the same location if the director has filed a complaint against 22 the license or location that has not been resolved alleging a violation of 23 any of the grounds set forth STATED in subsection A of this section until 24 the time the complaint has been finally adjudicated. 25

F. The director shall receive all complaints of alleged violations 26 of this chapter and is responsible for the investigation of all 27 allegations of a violation of, or noncompliance with, this title, any rule 28 adopted pursuant to this title or any condition imposed on the licensee by 29 the license. When the director receives three complaints from any law 30 enforcement agency resulting from three separate incidents at a licensed 31 establishment within a twelve-month period, the director shall transmit a 32 written report to the board setting forth the complaints, the results of 33 any investigation conducted by the law enforcement agency or the 34 department relating to the complaints and a history of all prior 35 complaints against the license and their disposition. The board shall 36 review the report and may direct the director to conduct further 37 investigation of a complaint or to serve a licensee with a complaint and 38 notice of a hearing pursuant to subsection G of this section. 39

G. On the director's initiation of an investigation or on the 40 receipt of a complaint and an investigation of the complaint as deemed 41 necessary, the director may cause a complaint and notice of a hearing to 42 be directed to the licensee setting forth THAT STATES the violations 43 alleged against the licensee and directing the licensee, within fifteen 44 days after service of the complaint and notice of a hearing, to appear by 45

HB 2334

- 42 -

filing with the director an answer to the complaint. Failure of the 1 licensee to answer may be deemed an admission by the licensee of 2 commission of the act charged in the complaint. The director may then 3 vacate the hearing and impose any sanction provided by this article. The 4 director may waive any sanction for good cause shown including excusable 5 neglect. With respect to any violation of this title or any rule adopted 6 pursuant to this title that is based on the act or omission of a 7 licensee's employee, the director shall consider evidence of mitigation 8 presented by the licensee and established by a preponderance of the 9 evidence that the employee acted intentionally and in violation of the 10 express direction or policy adopted by the licensee and communicated to 11 the employee and that the employee successfully completed training in a 12 course approved by the director pursuant to section 4-112, subsection G, 13 paragraph 2. The director may set the hearing before himself or an 14 administrative law judge on any of the grounds set forth STATED in 15 subsection A of this section. Instead of issuing a complaint, the 16 director may provide for informal disposition of the matter by consent 17 agreement or may issue a written warning to the licensee. If a warning is 18 issued, the licensee may reply in writing and the director shall keep a 19 record of the warning and the reply. 20

H. A hearing shall conform to the requirements of title 41, chapter 21 6, article 10. At the hearing an attorney or corporate officer or 22 employee of a corporation may represent the corporation. 23

I. The expiration, cancellation, revocation, reversion, surrender, 24 acceptance of surrender or termination in any other manner of a license 25 does not prevent the initiation or completion of a disciplinary proceeding 26 pursuant to this section against the licensee or license. An order issued 27 pursuant to a disciplinary proceeding against a license is enforceable 28 against other licenses or subsequent licenses in which the licensee or 29 controlling person of the license has a controlling interest. 30

J. The department shall provide the same notice as is provided to 31 the licensee to a lienholder, which has provided a document under section 32 4-112, subsection B, paragraph 3, of all disciplinary or compliance action 33 with respect to a license issued pursuant to this title. The state shall 34 not be liable for damages for any failure to provide any notice pursuant 35 to this subsection. 36

K. In any disciplinary action pursuant to this title, a lienholder 37 may participate in the determination of the action. The director shall 38 consider mitigation on behalf of the lienholder if the lienholder proves 39 all of the following by a preponderance of the evidence: 40

1. That the lienholder's interest is a bona fide security interest. 41 For the purposes of this paragraph, "bona fide security interest" means 42 the lienholder provides actual consideration to the licensee or the 43 licensee's predecessor in interest in exchange for the lienholder's 44 interest. Bona fide security interest includes a lien taken by the seller 45

HB 2334

- 43 -

of a license as security for the seller's receipt of all or part of the 1 purchase price of the license. 2

2. That a statement of legal or equitable interest was filed with 3 the department before the alleged conduct occurred that is the basis for 4 the action against the license. 5

3. That the lienholder took reasonable steps to correct the 6 licensee's prior actions, if any, or initiated an action pursuant to 7 available contract rights against the licensee for the forfeiture of the 8 license after being provided with notice by the department of disciplinary 9 action as provided in subsection J of this section. 10

4. That the lienholder was free of responsibility for the conduct 11 that is the basis for the proposed revocation. 12

5. That the lienholder reasonably attempted to remain informed by 13 the licensee about the business' BUSINESS'S conduct. 14

L. If the director decides not to revoke the license based on the 15 circumstances provided in subsection K of this section, the director may 16 issue an order requiring either, or both, of the following: 17

1. The forfeiture of all interest of the licensee in the license. 18 2. The lienholder to pay any civil monetary penalty imposed on the 19

licensee. 20 M. If any on-sale licensee proposes to provide large capacity 21

entertainment events or sporting events with an attendance capacity 22 exceeding a limit established by the director, the director may request a 23 security plan from the licensee that may include trained security 24 officers, lighting and other requirements. This subsection exclusively 25 prescribes the security requirements for a licensee and does not create 26 any civil liability for the state, its agencies, agents or employees or a 27 person licensed under this title or agents or employees of a licensee. 28

N. THE DIRECTOR MAY CONSIDER AS A MITIGATING FACTOR OR DEFENSE TO A 29 COMPLAINT AGAINST A LICENSEE FOR A VIOLATION OF SUBSECTION A, PARAGRAPH 10 30 OR 14 OF THIS SECTION THAT THE LICENSEE ACTED REASONABLY, RESPONSIBLY AND 31 AS EXPEDITIOUSLY AS POSSIBLE BY ASKING FOR INTERVENTION BY A PEACE OFFICER 32 TO PREVENT OR TO BREAK UP A RIOT, A FIGHT, AN ALTERCATION OR TUMULTUOUS 33 CONDUCT. 34

Sec. 17. Section 4-241, Arizona Revised Statutes, is amended to 35 read: 36

4-241. Selling or giving liquor to underage person; illegally 37 obtaining liquor by underage person; violation; 38 classification; definitions 39

A. If a licensee, an employee of the licensee or any other person 40 questions or has reason to question that the person ordering, purchasing, 41 attempting to purchase or otherwise procuring or attempting to procure the 42 serving or delivery of spirituous liquor or entering a portion of a 43 licensed premises when the primary use is the sale or service of 44

HB 2334

- 44 -

spirituous liquor is under the legal drinking age, the licensee, employee 1 of the licensee or other person shall do all of the following: 2

1. Demand identification from the person. 3 2. Examine the identification to determine that the identification 4

reasonably appears to be a valid, unaltered identification that has not 5 been defaced. 6

3. Examine the photograph in the identification and determine that 7 the person reasonably appears to be the same person in the identification. 8

4. Determine that the date of birth in the identification indicates 9 the person is not under the legal drinking age. 10

B. A licensee or an employee of the licensee who follows the 11 procedures prescribed in subsection A of this section and who records and 12 retains a record of the person's identification on this particular visit 13 is not in violation of subsection J of this section or section 4-244, 14 paragraph 9 or 22. This defense applies to actions of the licensee and 15 all employees of the licensee after the procedure has been employed during 16 the particular visit to the licensed premises by the person. A licensee 17 or an employee of the licensee is not required to demand and examine 18 identification of a person pursuant to subsection A of this section if, 19 during this visit to the licensed premises by the person, the licensee or 20 any employee of the licensee has previously followed the procedure 21 prescribed in subsection A of this section. 22

C. Proof that the licensee or employee followed the entire 23 procedure prescribed in subsection A of this section but did not record 24 and retain a record as prescribed in subsection B of this section is an 25 affirmative defense to a criminal charge under subsection J of this 26 section or under section 4-244, paragraph 9 or 22 or a disciplinary action 27 under section 4-210 for a violation of subsection J of this section or 28 section 4-244, paragraph 9 or 22. This defense applies to actions of the 29 licensee and all employees of the licensee after the procedure has been 30 employed during the particular visit to the licensed premises by the 31 person. 32

D. A licensee or an employee who has not recorded and retained a 33 record of the identification prescribed by subsection B of this section is 34 presumed not to have followed any of the elements prescribed in subsection 35 A of this section. 36

E. For the purposes of section 4-244, paragraph 22, a licensee or 37 an employee who has not recorded and retained a record of the 38 identification prescribed by subsection B of this section is presumed to 39 know that the person entering or attempting to enter a portion of a 40 licensed premises when the primary use is the sale or service of 41 spirituous liquor is under the legal drinking age. 42

F. It is a defense to a violation of subsection A of this section 43 if the person ordering, purchasing, attempting to purchase or otherwise 44 procuring or attempting to procure the serving or delivery of spirituous 45

HB 2334

- 45 -

liquor or to enter a portion of a licensed premises when the primary use 1 is the sale or service of spirituous liquor is not under the legal 2 drinking age. 3

G. A person penalized for a violation of subsection J of this 4 section or section 4-244, paragraph 22 shall not be additionally penalized 5 for a violation of subsection A of this section relating to the same 6 event. 7

H. The defenses provided in this section do not apply to a licensee 8 or an employee who has actual knowledge that the person exhibiting the 9 identification is under the legal drinking age. 10

I. Any of the following types of records are acceptable forms for 11 recording the person's identification: 12

1. A writing containing the type of identification, the date of 13 issuance of the identification, the name on the identification, the date 14 of birth on the identification and the signature of the person. 15

2. An electronic file or printed document produced by a device that 16 reads the person's age from the identification. 17

3. A dated and signed photocopy of the identification. 18 4. A photograph of the identification. 19 5. A digital copy of the identification. 20 J. An off-sale retail licensee or employee of an off-sale retail 21

licensee shall require an instrument of identification from any customer 22 who appears to be under twenty-seven years of age and who is using a 23 drive-through or other physical feature of the licensed premises that 24 allows a customer to purchase spirituous liquor without leaving the 25 customer's vehicle. 26

K. The following written instruments are the only acceptable types 27 of identification: 28

1. An unexpired driver license issued by this state. A driver 29 license issued to a person who is under twenty-one years of age is no 30 longer an acceptable type of identification under this paragraph thirty 31 days after the person turns twenty-one years of age. 32

2. An unexpired driver license issued by any other state, the 33 District of Columbia, any territory of the United States or Canada if the 34 license includes a picture of the person and the person's date of birth. 35

3. An unexpired nonoperating identification license issued pursuant 36 to section 28-3165. An unexpired nonoperating license issued to a person 37 who is under twenty-one years of age is no longer an acceptable type of 38 identification under this paragraph thirty days after the person turns 39 twenty-one years of age. 40

4. A form of identification license issued by any other state, the 41 District of Columbia, any territory of the United States or Canada if the 42 license is substantially equivalent to a nonoperating identification 43 license issued pursuant to section 28-3165 and includes a picture of the 44 person and the person's date of birth. 45

HB 2334

- 46 -

5. An unexpired armed forces identification card that includes the 1 person's picture and date of birth. 2

6. A valid unexpired passport or a valid unexpired resident alien 3 card that contains a photograph of the person and the person's date of 4 birth. 5

L. A person who is under the legal drinking age and who 6 misrepresents the person's age to any person by means of a written 7 instrument of identification with the intent to induce a person to sell, 8 serve, give or furnish spirituous liquor contrary to law is guilty of a 9 class 1 misdemeanor. 10

M. A person who is under the legal drinking age and who solicits 11 another person to purchase, sell, give, serve or furnish spirituous liquor 12 contrary to law is guilty of a class 3 misdemeanor. 13

N. A person who is under the legal drinking age and who uses a 14 fraudulent or false written instrument of identification or identification 15 of another person or uses a valid license or identification of another 16 person to gain access to a licensed establishment is guilty of a class 1 17 misdemeanor. 18

O. A person who uses a driver or nonoperating identification 19 license in violation of subsection L or N of this section is subject to 20 suspension of the driver or nonoperating identification license as 21 provided in section 28-3309. A person who does not have a valid driver or 22 nonoperating identification license and who uses a driver or nonoperating 23 identification license of another in violation of subsection C or E N of 24 this section has the person's right to apply for a driver or nonoperating 25 identification license suspended as provided by section 28-3309. 26

P. A person who knowingly influences the sale, giving or serving of 27 spirituous liquor to a person under the legal drinking age by 28 misrepresenting the age of such person or who orders, requests, receives 29 or procures spirituous liquor from any licensee, employee or other person 30 with the intent of selling, giving or serving it to a person under the 31 legal drinking age is guilty of a class 1 misdemeanor. A licensee or 32 employee of a licensee who has actual knowledge that a person is under the 33 legal drinking age and who admits the person into any portion of the 34 licensed premises in violation of section 4-244, paragraph 22 is in 35 violation of this subsection. In addition to other penalties provided by 36 law, a judge may suspend a driver license issued to or the driving 37 privilege of a person for not more than thirty days for a first conviction 38 and not more than six months for a second or subsequent conviction under 39 this subsection. 40

Q. A person who is of legal drinking age AT LEAST EIGHTEEN YEARS OF 41 AGE and who is an occupant of AN unlicensed premises is guilty of a class 42 1 misdemeanor if both of the following apply: 43

HB 2334

- 47 -

1. The person knowingly allows a gathering on such unlicensed 1 premises of two or more persons who are under the legal drinking age and 2 who are neither: 3

(a) Members of the immediate family of such person. 4 (b) Permanently residing with the person. 5 2. The person knows or should know that one or more of the persons 6

under the legal drinking age is in possession of or consuming spirituous 7 liquor on the unlicensed premises. 8

R. For the purposes of subsection Q of this section, "occupant" 9 means a person who has legal possession or the legal right to exclude 10 others from the unlicensed premises. 11

S. A peace officer shall forward or electronically transfer to the 12 director of the department of transportation the affidavit required by 13 section 28-3310 if the peace officer has arrested a person for the 14 commission of an offense for which, on conviction, suspension of the 15 license or privilege to operate a motor vehicle is required by section 16 28-3309, subsection A, B, C or D, or if the peace officer has confiscated 17 a false identification document used by the person to gain access to 18 licensed premises. 19

T. A person who acts under a program of testing compliance with 20 this title that is approved by the director is not in violation of section 21 4-244. 22

U. Law enforcement agencies may use persons who are under the legal 23 drinking age to test compliance with this section and section 4-244, 24 paragraph 9 by a licensee if the law enforcement agency has reasonable 25 suspicion that the licensee is violating this section or section 4-244, 26 paragraph 9. A person who is under the legal drinking age and who 27 purchases or attempts to purchase spirituous liquor under the direction of 28 a law enforcement agency pursuant to this subsection is immune from 29 prosecution for that purchase or attempted purchase. Law enforcement 30 agencies may use a person under the legal drinking age pursuant to this 31 subsection only if: 32

1. The person is at least fifteen but not more than nineteen years 33 of age. 34

2. The person is not employed on an incentive or quota basis. 35 3. The person's appearance is that of a person who is under the 36

legal drinking age. 37 4. A photograph of the person is taken no more than twelve hours 38

before the purchase or attempted purchase. The photograph shall 39 accurately depict the person's appearance and attire. A licensee or an 40 employee of a licensee who is cited for selling spirituous liquor to a 41 person under the legal drinking age pursuant to this subsection shall be 42 permitted IS ALLOWED to inspect the photograph immediately after the 43 citation is issued. The person's appearance at any trial or 44 administrative hearing that results from a citation shall not be 45

HB 2334

- 48 -

substantially different from the person's appearance at the time the 1 citation was issued. 2

5. The person places, receives and pays for the person's order of 3 spirituous liquor. An adult shall not accompany the person onto the 4 premises of the licensee. 5

6. The person does not consume any spirituous liquor. 6 V. The department may adopt rules to carry out the purposes of this 7

section. 8 Sec. 18. Section 4-243, Arizona Revised Statutes, is amended to 9

read: 10 4-243. Commercial coercion or bribery unlawful; exceptions 11 A. It is unlawful for a person engaged in the business of 12

distiller, vintner, brewer, rectifier or blender or any other producer or 13 wholesaler of any spirituous liquor, directly or indirectly, or through an 14 affiliate: 15

1. To require that a retailer purchase spirituous liquor from the 16 producer or wholesaler to the exclusion, in whole or in part, of 17 spirituous liquor sold or offered for sale by other persons. 18

2. To induce a retailer by any form of commercial bribery to 19 purchase spirituous liquor from the producer or wholesaler to the 20 exclusion, in whole or in part, of spirituous liquor sold or offered for 21 sale by other persons. 22

3. To acquire an interest in property owned, occupied or used by 23 the retailer in the retailer's business, or in a license with respect to 24 the premises of the retailer. 25

4. To furnish, give, rent, lend or sell to the retailer equipment, 26 fixtures, signs, supplies, money, services or other things of value, 27 subject to such THE exception as the rules adopted pursuant to this title 28 may prescribe, having regard for established trade customs and the 29 purposes of this subsection. 30

5. To pay or credit the retailer for advertising, display or 31 distribution service, except that the director may adopt rules regarding 32 advertising in conjunction with seasonal sporting events. 33

6. To guarantee a loan or repayment of a financial obligation of 34 the retailer. 35

7. To extend credit to the retailer on a sale of spirituous liquor. 36 8. To require the retailer to take and dispose of a certain quota 37

of spirituous liquor. 38 9. To offer or give a bonus, a premium or compensation to the 39

retailer or any of the retailer's officers, employees or representatives. 40 B. This section does not prohibit any distiller, vintner, brewer, 41

rectifier, blender or other producer or wholesaler of any spirituous 42 liquor from: 43

1. Giving financial and other forms of event sponsorship assistance 44 to nonprofit or charitable organizations for purposes of charitable 45

HB 2334

- 49 -

fund-raising that are issued special event licenses by the department. 1 This section does not prohibit suppliers from advertising their 2 sponsorship at such special events. 3

2. Providing samples to retail consumers at on-sale premises 4 establishments according to the following procedures: 5

(a) Sampling operations shall be conducted under the supervision of 6 an employee of the sponsoring producer or wholesaler. 7

(b) Sampling shall be limited to twelve ounces of beer or cooler 8 products, six ounces of wine or two ounces of distilled spirits per person 9 per brand. 10

(c) If requesting the on-sale retailer to prepare a drink for the 11 consumer, the producer's or wholesaler's representative shall pay the 12 retailer for the sample drink. 13

(d) The producer or wholesaler may not buy the on-sale retailer or 14 the retailer's employees a drink during their working hours or while they 15 are engaged in waiting on or serving customers. 16

(e) The producer or wholesaler may not give a keg of beer or any 17 spirituous liquor or any other gifts or benefits to the on-sale retailer. 18

(f) All sampling procedures shall comply with federal sampling laws 19 and regulations. 20

3. Providing samples to retail consumers on an off-sale retailer's 21 premises according to the following procedures: 22

(a) Sampling shall be conducted by an employee of the sponsoring 23 producer or wholesaler. 24

(b) The producer or wholesaler shall notify the department in 25 writing or by electronic means not less than AT LEAST five days before the 26 sampling of the date, time and location of the sampling and of the name of 27 the wholesaler or producer distributing the product. 28

(c) Sampling shall be IS limited to three ounces of beer, one and 29 one-half ounces of wine or one ounce of distilled spirits per person per 30 day for consumption on the premises and up to seventy-two ounces of beer 31 and two ounces of distilled spirits per person per day for consumption off 32 the premises. 33

(d) An off-sale retailer shall not permit sampling to be conducted 34 on a licensed premises on more than twelve days in any calendar year per 35 wholesaler or producer. 36

(e) Sampling shall be limited to two wholesalers or producers at 37 any one off-sale retailer's premises on any day and shall not exceed three 38 hours on any day per approved sampling. 39

(f) A producer conducting sampling shall buy the sampled product 40 from a wholesaler OR FROM THE RETAILER WHERE THE SAMPLING IS BEING 41 CONDUCTED. IF THE PRODUCT FOR THE SAMPLING IS PURCHASED FROM THE 42 RETAILER, THE AMOUNT PAID FOR THE PRODUCT MUST BE THE SAME AMOUNT THAT THE 43 RETAILER CHARGES FOR SALE TO THE GENERAL PUBLIC. 44

HB 2334

- 50 -

(g) The producer or wholesaler shall not provide samples to any 1 person who is under the legal drinking age. 2

(h) The producer or wholesaler shall designate an area in which 3 sampling is conducted that is in the portion of the licensed premises 4 where spirituous liquor is primarily displayed and separated from the 5 remainder of the off-sale retailer's premises by a wall, rope, door, 6 cable, cord, chain, fence or other barrier. The producer or wholesaler 7 shall not permit persons under the legal drinking age from entering the 8 area in which sampling is conducted. IF THE RETAIL LOCATION HAS BEEN 9 ISSUED A PERMANENT SAMPLING PRIVILEGE FROM THE DEPARTMENT, THE REQUIREMENT 10 FOR SEPARATION FROM THE REMAINDER OF THE PREMISES BY WALL, ROPE, DOOR, 11 CABLE, CORD, CHAIN, FENCE OR OTHER BARRIER IS NOT REQUIRED. 12

(i) The producer or wholesaler may not provide samples to the 13 retailer or the retailer's employees. 14

(j) Sampling shall not be conducted in retail premises with a total 15 of under five thousand square feet of retail space unless at least 16 seventy-five percent of the retailer's shelf space is dedicated to the 17 sale of spirituous liquor. 18

(k) The producer or wholesaler may not give spirituous liquor or 19 any other gifts or benefits to the off-sale retailer. 20

(l) All sampling procedures shall comply with federal sampling laws 21 and regulations. 22

C. Notwithstanding subsection A, paragraph 4 of this section, any 23 wholesaler of any spirituous liquor may sell tobacco products or 24 foodstuffs to a retailer at a price not less than the cost to the 25 wholesaler. 26

D. Notwithstanding subsection A, paragraph 4, and subsection B, 27 paragraph 2, subdivision (e) of this section, any wholesaler may furnish 28 without cost promotional items to an on-sale retailer, except that the 29 total market value of the promotional items furnished by that wholesaler 30 to that retailer in any calendar year shall not exceed five hundred 31 dollars. For the purposes of this subsection, "promotional items" means 32 items of equipment, supplies, novelties or other advertising specialties 33 that conspicuously display the brand name of a spirituous liquor product. 34 Promotional items do not include signs. 35

E. Notwithstanding subsection A, paragraphs 4 and 7 of this 36 section, a wholesaler may in the wholesaler's sole discretion accept the 37 return of malt beverage products from an on-sale retailer under any of the 38 following conditions: 39

1. The retailer's licensed premises will be closed for business for 40 thirty or more consecutive days, and the products are likely to spoil or 41 expire during the business closing period. 42

2. The retailer's licensed premises is used primarily as a music or 43 live sporting venue with a permanent occupancy of more than one thousand 44

HB 2334

- 51 -

people, and the products are likely to spoil or expire during the time 1 period between venue events. 2

3. The retailer holds a governmental entity license and conducts 3 less than six events per year at which products are sold, and the products 4 are likely to spoil or expire during the time period between events. 5

F. It is unlawful for a retailer to request or knowingly receive 6 anything of value that a distiller, vintner, brewer, rectifier or blender 7 or any other producer or wholesaler is prohibited by subsection A, D or E 8 of this section from furnishing to a retailer, except that this subsection 9 shall DOES not prohibit special discounts provided to retailers and based 10 on quantity purchases. 11

Sec. 19. Laws 2014, chapter 253, section 37 is amended to read: 12 Sec. 37. Existing domestic farm winery licenses; temporary 13

exemption; other existing licenses 14 A. Notwithstanding section 4-205.04, Arizona Revised Statutes, as 15

amended by this act LAWS 2014, CHAPTER 253, SECTION 11, holders of 16 domestic farm winery licenses in this state on the effective date of this 17 act JULY 24, 2014 that do not qualify under the new statutory requirements 18 established in this act LAWS 2014, CHAPTER 253 may continue to operate 19 under the licenses previously issued, without any expansion of operations, 20 until January 1, 2019 2020. 21

B. Notwithstanding section 4-205.04, Arizona Revised Statutes, as 22 amended by this act LAWS 2014, CHAPTER 253, SECTION 11, holders of 23 domestic farm winery licenses that also hold beer and wine bar licenses 24 and beer and wine store licenses that were issued before January 1, 2014 25 may also hold beer and wine bar licenses and beer and wine store licenses 26 issued at the site of the winery before January 1, 2014. 27